China Life Pension Company (CLPC) says it might look to diversify its enterprise annuity product range after going live with a new third-party investment management system.
Yong Wang, head of IT at the $4 billion subsidiary of China Life Insurance, says it may consider developing enterprise annuity products with guaranteed pay-out options now that it has a fully fledged trading and execution capability.
Last week CLPC went live with an investment management solution provided by Charles River. It uses this to trade, execute and manage domestic equities, fixed income, ETF, money market and IPO asset investments and to monitor compliance.
Wang says CLPC chose Charles River partly due to the need for system alignment with sister company China Life AMC, which uses a similar platform provided by the firm.
CLPC was approved last year as an investment manager for enterprise annuity, a sort of supplementary voluntary retirement savings programme. This enables it to make independent portfolio investment and trading decisions on which assets annuity funds invest in.
Originally, its enterprise annuity business was managed by China Life AMC, but it has been shifting this gradually to CLPC over the past few years via an internal reorganisation.
With its new execution system, CLPC’s investment and dealing desks can consolidate orders across all enterprise annuity clients – totalling 400 accounts – into a single command, says Wang.
“For example, if a CLPC investment manager decides to buy one particular stock for all of its 400 client accounts, the front office would only need to send one execution order to the stock exchange to complete that stock order for all accounts,” he notes.
But CLPC is keeping an investment management platform provided by local execution system provider Hundsun Technologies, given that Charles River’s system at present does not have direct connectivity to servers of the nation’s exchanges in Shanghai and Shenzhen.
In China, enterprise annuity is encouraged by the government as a form of optional retirement scheme that employees can participate in on top of their social security state pay-out when they reach retirement age: 60 for men and 50-55 for women.
Private pension schemes only made up a minor share in terms of meeting the retirement needs of the country’s 185 million over 60s (13.7% of China’s total population) as at the end of 2011.
Combined contributions for enterprise annuities from the five leading private pension insurance companies, including CLPC, totalled Rmb37.4 billion ($5.8 billion) for the first six months last year, according to data from the China Insurance Regulatory Commission.
At present the investment management market for enterprise annuity is dominated by three players aside from CLPC: Ping An Annuity, Changjiang Pension Insurance and Taiping Pension.
In China, insurers are allowed to invest enterprise annuity funds into bank deposits, central bank bills, government treasuries, enterprise bonds issued by state-owned enterprises, convertible bonds, new IPO stocks, and equity investment fund products.
Earlier this month, CLPC announced it had implemented DST's mid- and back-office portfolio valuation system.