Nine companies have now been awarded licences to operate mandatory second pillar funds with further applications in process. Separate licences are needed for each fund, the options being voluntary pension funds, funds for hazardous occupations, universal funds, and voucher funds. The universal funds do not start until January 2002. Deadline for qualified individuals to select an "occupational" fund was 31 December.
Government is reported to be considering allowing Hong Kong companies to buy A-shares in mainland state enterprises as a way of allowing the SOEs to raise money to meet their pension liabilities. A National Social Security Fund with a relatively liberal investment mandate has been set up to handle the money needed to subsidise existing pensions.
New Unified Pension System introduces funded system alongside reduced benefits of the state system, but acceptance has been slow except in Shanghai. The reason is partly that benefits are higher under the old pay-as-you-go system. The New Unified Pension System covers all of urban China excluding Hong Kong, Macao and Taiwan, but not the rural population. Investment is organised on a provincial basis.
Four new domestic life assurance companies have been set up and Britain’s Prudential granted a licence to operate in Guangzhou.
Funded scheme has been introduced supported by World Bank loans. System is run by one state fund and 14 private sector funds. Assets under management with the private funds now account for 41.7% of the total, and plan is to privatise the State Pension Fund once its share has dropped to 25%. Investment rules are less restrictive for the private funds.
Government priority is to increase availability of annuities. It also wants to extend the funded system to the self-employed and farmers.
THE MARKET for asset management in Switzerland started to
change substantially about two years ago, says Urs Baltensweiler of Julius Bär
Asset Management. About that time some of the big public sector funds began to
outsource some of their management and since then the proportion of pension fund
money managed by independent asset managers has grown rapidly.
Growth of business has not allowed foreign managers to make big inroads. Partly this is because of cultural and language differences which allow domestic providers to continue to dominate the market. Partly it is because the domestic providers in any case have high reputations. Banks like Credit Suisse and UBS are in anybody’s list of leading international institutions while in the next tier Julius Bär, Lombard Odier and Pictet are long established and used to holding their own in a competitive market.
According to Julius Bär’s estimates, the proportion of Swiss pension fund assets managed by foreign firms may be between 5% and 10%. Most of these foreign mandates, according to Mr Baltensweiler, are either for passive or specialist management.
Foreign firms are making bigger inroads in the custody business which in Switzerland has often been bundled with asset management by the domestic providers.