Facing huge pension deficits as their population ages without significant retirement savings, China has announced a 401(k)-like scheme that will include tax exemptions. Their current state-run annuity plan, called “Pillar 1,” does not offer tax benefits and has attracted only $87 billion from 20 million employees at fewer than 60,000 companies. The new scheme is expected to grow to $1 trillion by 2015.
There is hope and speculation that an IRA-like system could be set up for people who are not covered by a corporate retirement plan, but the 401(k) scheme is the first step.
There are many lessons and insights to be learned from the U.S. retirement system, including this question for critics of the 401(k) system: If 401(k) plans are a failed experiment, why are other major countries like China emulating it?
