China's personal pension scheme: save CNY 12,000 a year and cut your tax
Put up to CNY 12,000 a year into a personal pension account, deduct it from taxable income and pay just 3% tax when you take it out. Here is how it works.
China's personal pension scheme (个人养老金) is a voluntary, tax-advantaged retirement account that sits on top of basic social insurance and any company annuity. After a pilot in 36 cities from 2022, it has been open nationwide since 15 December 2024. With an ageing population and a basic pension that replaces only part of working income, the personal pension gives workers a way to save more while cutting their income tax. This guide explains how the China personal pension scheme works, the CNY 12,000 tax deduction, what you can invest in, and when you can withdraw.
China's three pension pillars
China's retirement system has three pillars. The first is the basic pension, funded through social insurance contributions from employers and employees. The second is occupational pensions, such as enterprise annuities offered by some employers. The third is the personal pension, which individuals choose to fund themselves. The personal pension is designed to fill the gap between what the basic pension provides and what people need in retirement.
How the personal pension tax benefit works
Contributions. You can contribute up to CNY 12,000 a year, and the whole amount can be deducted from your taxable income for individual income tax.
Growth. Investment returns inside the account are not taxed while they build up, so your savings compound faster.
Withdrawals. When you withdraw, the money is taxed at a flat 3%, separately from your other income.
For example, if your top tax rate is 10%, a CNY 12,000 contribution saves CNY 1,200 of income tax this year, and you pay CNY 360, or 3%, when you withdraw it later. At a 20% tax rate the saving is CNY 2,400, against the same CNY 360 on withdrawal. Taxpayers whose income is below the taxable threshold gain little, because they have no tax to save but would still pay 3% on withdrawal.
What you can invest in
Personal pension money can be invested in savings deposits, bank wealth-management products, commercial pension insurance and mutual funds. Since the national rollout, the list also includes government bonds, specific pension savings products and approved index funds. All products must be on the approved list for personal pension accounts. Lower-risk products such as deposits and government bonds suit people close to retirement, while index funds may suit younger savers with decades to invest. Check each fund's risk rating before you choose; our guide to China's R1 to R5 fund risk ratings explains what they mean.
When you can take money out
Personal pension savings are mainly for retirement. You can withdraw when you reach retirement age, or in cases of permanent disability, death or permanent emigration. Since the expansion, you can also withdraw for serious illness, long-term unemployment, or if you receive minimum living allowances. Payouts can be taken monthly, in instalments or as a lump sum. Because access is restricted, only contribute money you will not need before retirement.
How to open a personal pension account
Open a personal pension account through the national social insurance public service platform or a participating bank's app. You will link a dedicated personal pension fund account at a bank, then choose products from the approved list. Contributions can be made in one payment or in instalments during the year, up to CNY 12,000.
To claim the tax deduction, you can provide the contribution information to your employer for monthly withholding or claim it in the annual IIT reconciliation; see our guide to China's annual IIT reconciliation.
Is the personal pension worth it?
For anyone paying income tax at 10% or more, the deduction usually outweighs the 3% withdrawal tax, making the scheme attractive. Lower earners may prefer more flexible savings, such as money market funds; see our guide to Yu'e Bao and WeChat money market funds. See how much tax you pay now, and what the deduction is worth, in our China salary tax calculator by entering it under special deductions, and read our guide to China individual income tax.
Frequently asked questions
How much can I contribute to China's personal pension?
Up to CNY 12,000 a year, all of which is tax-deductible.
How are personal pension withdrawals taxed?
At a flat 3%.
When did the personal pension open nationwide?
On 15 December 2024, after a pilot in 36 cities.
Sources
This article is general information, not financial advice.