Zhao Cen and Zhao Guangyi: The insurance industry should actively participate in the reform of pension marketization| insurance innovation

Text/Zhao Cen, Deputy Secretary of the Party Committee and Vice Dean of Wudaokou School of Finance, Tsinghua University, Director of the China Insurance and Pension Research Center of the National Institute of Financial Research of Tsinghua University, and Zhao Guangyi, Director of the Foreign Affairs Division of the International Department of the China Insurance Regulatory Commission

The pension system occupies an important position in social security, the market-oriented institutions represented by insurance actively participate in the top-level design of the pension system and become an important force in promoting the construction of the pension system, this article proposes to promote the reform of the pension system from the perspective of marketization and build an ideal pension system.

Perfect social security is the "safety net" of the people, the "stabilizer" of social operation and the "regulator" of income distribution, which can optimize the allocation of resources, promote social fairness and ensure the long-term peace and stability of the country, and can provide important support for supply-side structural reform. The pension system occupies an important position in social security and carries the important mission of the people to live in peace in their old age. China's aging pressure is heavy, economic growth has experienced a period of gear change, and the contradictions of "getting old before getting rich" and "getting rich and getting old" are becoming increasingly prominent. The pension structure is unbalanced, the problem of "one family" in basic social insurance has become a social consensus, the reform of the pension system is imminent, and the reconstruction of the system has a long way to go. The promotion of the reform process of the pension system and the introduction of major reform measures such as the reduction of social pension insurance have provided rare policy opportunities for market-oriented old-age security and extended an olive branch to market-oriented institutions represented by the insurance industry.

The market-oriented mechanism represented by insurance is an important force to promote the construction of the pension system

Due to the historical reasons for the development of the social security system, China's idea of providing social security services such as pension services mainly by public institutions has always dominated, and the voice of market-oriented old-age security at the level of the pension system is relatively weak. From the perspective of international mainstream theory and practice, market-oriented institutions play an irreplaceable role in the pension system. In 1994 and 2005, the World Bank successively proposed two old-age security frameworks, both of which regard market-oriented old-age security as an important part. In recent years, the wave of pension reform set off in Europe, Latin America, Australia and other parts of the world has generally positioned market-oriented old-age security as a backbone force that complements social insurance. The insurance industry, which traditionally provides commercial pension services, is the main force of market-oriented pension security. If the pension system does not have a good top-level design, it is difficult to play an important role in market-oriented old-age security and effectively promote the comprehensive and healthy development of the pension market. The market-oriented mechanism represented by insurance actively participates in the top-level design of the pension system, becomes an important force in promoting the construction of the pension system, can fully tap the role space of market institutions, gives full play to the unique advantages of the market mechanism, and contributes wisdom to the "old age" of all the people.

A market-based pension system helps to promote a comprehensive balance between social equity and efficiency

The "Proposal of the Central Committee of the Communist Party of China on Formulating the Thirteenth Five-Year Plan for National Economic and Social Development" adopted by the Fifth Plenary Session of the Eighteenth Central Committee proposes to establish a "fairer and more sustainable" social security system, which points out the direction for the reform of the pension system. According to this requirement, the market mechanism represented by insurance can devote itself to the construction of the pension system, and can take the "comprehensive balance of fairness and efficiency" as the basic perspective. The relationship between fairness and efficiency is not the whole content of old-age security, but it can maximize the advantages of the mechanism of market-oriented security. For the market-oriented mechanism, the comprehensive balance of fairness and efficiency is both a world view and a methodology, which can be used as a yardstick to explore the principles of the pension system and form a system proposal that integrates it.

In the pension system, the main form of social pooling in the form of pay-as-you-go is usually the responsibility of the government, and the basic pension is provided by public institutions. The contribution of this part of the pension is usually compulsory, covering the most basic costs of old age, and has a strong redistribution nature. Commercial endowment insurance, occupational pension, personal pension and other market-oriented old-age security, usually under government legislation and supervision, market-oriented institutions provide diversified products, and become an important and even main source of income for the elderly in the international mainstream model. Compared with the basic pension provided by public institutions, this part of the pension can reduce costs, improve income, highlight the efficiency advantages of the market mechanism, so from the relationship between fairness and efficiency to study the institutional structure of the pension system, you can clarify the relationship boundary between the government and the market in the pension field, and explain the specific way in which the market mechanism plays a fundamental role in the allocation of pension resources.

Adhering to the comprehensive balance of fairness and efficiency will also help to give play to the market mechanism and improve the overall level of fairness and efficiency. In terms of fairness, market-oriented pensions are usually accumulated by pension beneficiaries for their own old age, and there is no intergenerational transfer, which enhances the fairness of risk assumption by different generational groups. The contribution of market-oriented pension is usually related to the income of the old-age pension, which has the characteristics of incentive compatibility, which is conducive to promoting the fairness of the sharing of pension risks between the same generation. The strong service capabilities of market institutions can provide old-age security services faster and better, which is conducive to reducing the difference in the level of old-age security between social groups. In terms of efficiency, market mechanisms can either improve the cost efficiency of the pension system, improve the ratio relationship between the contribution rate and the replacement rate under the pension system, or contribute to improving the sustainability of the pension system through the accumulation of long-term capital investment. A sound market mechanism can make it more convenient, efficient and inexpensive for all people to enjoy old-age security services, and provide strong institutional support for China's response to the "silver wave" of population aging. Moreover, the market-oriented efficiency advantage of the third pillar of the pension system makes the cake of the pension market bigger, improves the overall welfare level, and can provide greater room for maneuver for the overall distribution of pensions, so the mutual promotion between efficiency and fairness is also an important factor that cannot be ignored in the design of the pension system.

Expand commercial endowment insurance, make up for the third pillar of the pension system, its macro effect can not be underestimated. The breadth of pension coverage and the adequacy of the number of pensions are also closely related to income distribution, which is of great significance for preventing poverty in the elderly. At the same time, pension contributions are an important part of the cost of human resources of enterprises, and the size of the burden of enterprises is related to the level of competitiveness and the vitality of the overall economy, commercial insurance is an effective supplement to the enterprise annuity, which can help reduce the burden of enterprises and release the vitality of micro-economies. In addition, the market-oriented pension fund is one of the main institutional investors in the capital market, which is of positive significance for improving the level of capital accumulation, strengthening investment efficiency and promoting the development of the capital market. As an important institutional infrastructure, the pension system has a significant spillover effect, starting from the relationship between fairness and efficiency, the macro impact of the pension system can be more clearly understood.

Promote the construction of an ideal system for the pension system with marketization

There may be two ways to promote the reform of the pension system from the perspective of marketization: one is to take the improvement of the system as the goal. The so-called improved system refers to the improvement of specific policy measures of the pension system on the basis of sorting out the existing situation of the pension system. The advantage of this idea is that it can put forward targeted solutions to specific problems, which is more operable and is a method adopted by more relevant research. The problem of improvement is the lack of support from objective standards, the subjectivity of policy recommendations is large, it is impossible to judge the merits of reform proposals, it is difficult to determine the quantitative standards of reform measures, and it is easy to be influenced by interest groups and face the questioning of independence. This is also one of the important reasons why in the absence of an ideal model as a reference, opinions on pension reform are divergent and even seriously divergent. The other path is the ideal system. The ideal system is based on summarizing the international model and China's national conditions, based on the objective evaluation index system, based on the actuarial balance, and selects the most optimized pension system through quantitative testing. Compared with the improved type, the ideal type does not rely on subjective will, abandons the color of interest, and enshrines objectivity and independence as principles. This is in line with the basic position of the market-oriented pension mechanism and should become the central goal of promoting the reform of the pension system.

The ideal pension system has four characteristics: First, it is in line with international trends. The ideal system draws on the international model, which helps to promote the organic integration of the international mature insurance model and China's national conditions, and promote the international exchange of the pension system. The second is to establish objective evaluation standards for the construction of the pension system. The ideal type takes the optimal pension system as the goal, transcends the interests of the department, adheres to the ultimate feeling, gives the pension reform an ideal value, establishes an objective benchmark for the choice of the pension system, and provides an evaluation yardstick for the reform measures. The third is based on the actuarial balance of pensions. The ideal system is based on actuarial technology, under the condition of total demand for a given number of years, the sustainability of different supply structures is measured, and the optimal pension system is determined by calibrating the fairness and efficiency evaluation index system. The fourth is to focus on the macro structure of the pension system. The ideal system is intended to build the overall structure of the pension, mainly to solve the overall replacement rate of the pension system, the pension structure of several levels, the proportional relationship between the various levels, and the specific functions and functions of the market-oriented mechanism at each level waiting to be verified.

The study of the ideal pension system has begun an attempt to build a theoretical system in the field of China's market-oriented pension. To reverse the imbalance in the pension structure, it is necessary for market-oriented pension institutions, including the insurance industry, to build a self-contained theory system on the basis of the traditional social insurance-led system framework, to make up for the lack of systematic market-oriented opinions in the top-level design of pensions for a long time, and to form a strong supplement to the research on the overall national pension security system. The ideal pension system should become the overall program of the market chemical theory system, and become the oath declaration of the market-oriented institutions represented by the insurance industry to devote themselves to the construction of the national pension system.

The insurance industry should play an important role in the reform of the pension system

From the perspective of international practice, the insurance industry is a traditional service provider in the field of pensions, one of the basic forces to promote the development of the pension system, and plays an indispensable and important role in ensuring the national pension. In terms of pension risk protection, pension management, pension financial services and asset management for the purpose of pension, the insurance industry provides a wide range of detailed and diversified services. The Chinese government has high expectations for the role of commercial insurance in the pension sector. The Third Plenary Session of the Eighteenth Central Committee proposed: "Formulate and implement preferential policies such as tax exemption and tax deferral, accelerate the development of enterprise annuities, occupational pensions, and commercial insurance, and build a multi-level social security system." The Fifth Plenary Session of the Eighteenth Central Committee once again affirmed that "the development of occupational pensions, enterprise annuities and commercial pension insurance" was affirmed. The State Council's "Several Opinions on Accelerating the Development of the Modern Insurance Service Industry" not only proposes to "carry out the pilot project of individual tax deferred commercial endowment insurance in a timely manner", but also requires "commercial insurance to be built into an important pillar of the social security system". The insurance industry has great potential in the field of pensions, and its contribution to the reform of the pension system is expected.

At present, insurance institutions have been widely active in the pension market and have become the main force of market-oriented old-age security. For example, the enterprise annuity is a major form of occupational pension in China. With the advantages of professional strength, network distribution and business experience, the share of enterprise annuity assets managed by the insurance industry as a trustee accounts for about 70% of the total market share, and the basic share of assets managed as an investment manager has been close to 40% in the past five years, which is a well-deserved leader in the enterprise annuity market. In April 2015, the Notice of the General Office of the State Council on Printing and Distributing the Measures for Occupational Pensions of Organs and Institutions was officially released, marking the establishment of the occupational pension system. The function and mode of occupational annuity are basically the same as those of enterprise annuities, and it is expected that it will become an important stage for the insurance industry to show its skills. In addition, the field of pension for individuals and families is the traditional position of the insurance industry, and commercial pension insurance has always provided rich and diverse old-age security services. In August 2015, the Measures for the Administration of Investment in basic pension insurance funds were promulgated, and the market-oriented operation of social insurance was launched. Compared with other financial institutions, the insurance industry has the richest long-term capital investment management experience and is a natural partner of social security funds. The market practice in the pension field has laid a good foundation for the insurance industry to actively participate in the reform of the pension system, but the influence of the insurance industry in the pension field and its contribution to the reform of the pension system cannot match its market position. In the important historical period of pension system reform, the insurance industry should give full play to its expertise, gather wisdom, send out a representative voice of the market-oriented pension mechanism, and make due contributions to the construction of China's pension system.

This article was published in the November 2016 issue of Tsinghua Financial Review, edited by Lei Wang

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