China's Ministry of Labour and Social Security (MoLSS) has begun accepting applications for a license to provide services to the embryonic enterprise annuities (voluntary corporate pensions) industry.

The ministry has given service providers two weeks to submit, with the deadline the end of May, according to fund management executives in Shenzhen. Fund houses are desperate to be allowed into the pensions space, following four years of dreadful stock market performance that has damaged industry assets under management, and damaged confidence in investing in equities.

Enterprise annuities already exist in experimental form, with the MoLSS guessing there is already Rmb26 billion ($3.14 billion) of annuity assets sold as group life insurance. Last year it passed regulations allowing annuities to be sold nationwide on a tax-qualified basis.

Those tax rules, however, have yet to be fleshed out. The pace of growth of corporate pensions will depend on what kind of tax treatment is arranged. Nevertheless, the industry's conventional wisdom is that this industry can grow by Rmb100 billion a year - although some fund execs are sceptical of this figure.

No one expects rapid growth in enterprise annuities, particularly as long as the tax situation is cloudy, but fund managers are keen to get started.

No one knows how many licenses the MoLSS will hand out, but the first ones are expected in August (some say late July). Ultimately every fund management company wants to be involved in pensions - none can afford not to be - and eventually competition will limit most firms' opportunity. The government has also capped fees. But providers believe initially the MoLSS will limit the number of participants, giving those lucky firms a huge advantage.

A corporation setting up an enterprise annuity scheme needs an investment manager, a custodian (which must be a bank), a trustee and a record keeper. Commercial banks and insurance companies are able to carry out multiple functions, while fund houses will concentrate on investment management.

The industry expects various providers to form partnerships to provide clients with a bundled service. But fund execs report that no such deals have been struck. Instead, financial services companies are seeking licenses for their own particular areas of expertise. Once the MoLSS announces who is licensed to do what, participating firms will then form various alliances - some strategic, to create a one-stop shop, and others ad hoc, depending upon circumstances and the client's preferences.

Last year the China Insurance Regulatory Commission, pressured by insurers worried that the MoLSS was shutting them out of pensions, tried to pre-empt the MoLSS by awarding pension licenses to Ping An Life and Taiping Life. But these firms have not been active nationwide, according to sources in Hong Kong, because the MoLSS shrugged off the move.