BoCom to form pension JV with HSBC

The lion bank will have a 20% stake in the venture and an open doorway to tap ChinaÆs fast growing retirement market.
Bank of Communications (BoCom) is preparing to form a pension joint venture with HSBC and will hold a 20% stake in the new business, according to BoCom chairman Jiang Chaoliang.

For the purpose of putting the business together, BoCom is applying to the China Insurance Regulatory Commission (CIRC) for a business license to operate an insurance business, following the CIRCÆs recent deregulation that allows banking groups to operate in the insurance/pension space.

He Jie Rong, a corporate spokesperson at BoCom in Shanghai, says the plan for the venture is still in an initial brainstorming stage. HSBC spokesperson Laine Santana says the group is reviewing the plans with BoCom.

Estimates on the size of ChinaÆs pension business vary. However, its voluntary defined contribution model with enterprise annuities is tipped to lead the growth of the industry.

In a study completed by Hewitt Consulting in the four major cities of China, including Shanghai, Beijing, Guangzhou and Shenzhen, the firm estimates the adoption rate of enterprise annuities at about 10.2%. Around 20.3% of the 324 enterprises that responded to the Hewitt survey noted they are committing to their employeesÆ retirement by means of allocation in company book reserve. Another 28.8% said they are still handing pension assets over to their local Labour and Social Security Bureau, and 37.3% said they are using pension services provided by insurance companies. Around 3.4% of the respondents said they are committed to self-directed investments.

In another study completed by Allianz Global Investors, Asia-PacificÆs pension asset pool is estimated to reach $4.5 trillion by 2015. In particular, ChinaÆs pension asset pool is expected to be the highest growing and the largest market in the region, making up about 38.5% of AsiaÆs pension market. ChinaÆs corporate annuities are tipped to grow by 23.1% over the years.
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