The first private pension scheme in 36 cities was launched by the SHANGHAI China on Friday as it grapples with a rapidly ageing population, allowing individuals to open retirement accounts at banks to buy pension products ranging from deposits to mutual funds.
The official launch of China's version of the IRA or Individual Retirement Accounts was made in the United States.
The Ministry of Human Resources and Social Security said that the first batch of eligible cities will include Chengdu, Shanghai, Guangzhou and Beijing. Pilot programmes are already being rolled out in some places.
The third pillar of China's pension system will be the public safety net and corporate annuities, as China seeks to address shortcomings in the current pension system.
China unveiled plans for the private pension scheme in April. It published rules, listed approved products and named companies that can participate in the scheme earlier this month.
Domestic workers covered by China's public pension insurance can contribute up to 12,000 yuan $1,676 per year to their individual accounts and receive tax benefits.
The state-backed China Securities Journal reported that they were able to open personal pension fund accounts with 23 commercial banks, including the top six state banks and smaller peer Bank of Shanghai.
Those who invest in qualified products and services, including banking wealth management products, deposits, insurance, and public funds, can make voluntary deposits into the account.
In 20 years, 28 per cent of China's population will be more than 60 years old, up from 10 per cent today, making it one of the most rapidly-aging populations in the world, according to the World Health Organization.