BEIJING, (Reuters) – China has unveiled a new private pension system on Thursday. It allows employees to invest in financial products and save money in their pension accounts, as part of a recent move to tackle the ageing problem.

Under the new scheme employees can make contributions of up to 12,000yuan ($1,863) per annum to their pension fund. That’s compared to a fixed payment made by both employers and employees in the state pension plan.

This would be prohibitively expensive for the majority of people on the labor market. The per capita disposable income in 2021 was 35,128 Yuan.

According to the announcement, which was made public by the government, it will adjust the maximum amount allowed in the plan to reflect economic conditions.

For the first time, personal pension contributions would qualify for tax deductions

Private pension funds can be invested in certain products like deposits or public funds.

Independent consultants estimate that the private market for pensions will reach $1.7 trillion by 2025 from $300 billion at present.

China must strengthen its diversified pension insurance because of the aging population. Nie Wen is an economist with Shanghai’s Hwabao Trust.

According to projections by the World Health Organization, China will have 28% more people than 60 in 20 years. This is an increase of 10% from today.

($1 = 6.4396 renminbi)