OREANDA-NEWS. January 06, 2016. Enjoyable Trust, the first financial pension trust product in China, was launched in Beijing.

Jointly launched by IB and FOTIC and featured both individual pension and family wealth inheritance, the product targets at private banking clients. It marks that IB private banking has officially sailed into the “blue sea” of pension finance.

Combining pension and wealth inheritance
As one of the first Chinese commercial banks engaged in pension finance, IB has made extensive research and exploration concerning pension finance in recent years, and formed a business structure initially.

“As a market-oriented service tool, pension finance is an important supplementary to the government-led social security system and pension service.” Chen Jinguang, Vice President of IB said at the press conference of Enjoyable Trust product, “Against the background of aging population, commercial banks should perform their responsibilities as a major force in the country's financial system.”

It is learnt that, based on Enjoyable Life, the first pension finance service system launched by the bank, Enjoyable Trust is a pension finance product released for HNWIs by IB private banking together with FOTIC which is specialized in family trust. With the threshold of 6 million yuan and a design structure by reference to “family trust”, the consignor delivers property under trust once only. After three years of close period since establishment, trust benefits will be distributed to designated beneficiaries each year in a way similar to annuity, and all the rights in the property will belong to the beneficiaries.

“During our communication with private banking clients, we've found that they have double demands for pension wealth planning, i.e. their own pension and also family wealth heritance.” Xue Ruifeng, GM of the Private Banking Department of IB told the reporter, that the bank developed Enjoyable Trust product based on its experiences in family trust. Such products are exclusive properties with flexible in arrangement, which can meet pension demand first and wealth heritance later, thus helping private banking clients to better plan their properties.  

From investment, operation, payment and settlement, the whole process of the Enjoyable Trust will be made through monetary capitals, becoming the first real financial pension trust product in China. “What banks excel is capital operation and management, the monetary based Enjoyable Trust is the very product that provides pension protection for clients in a way that banks specialize in. It acquires long term stable gains via medium to low risk allocation, and fully ensures the benefits of the beneficiaries through trust mechanism,” said Xue Ruifeng.

Emerging Financial Pension Trust
The “silver hair” economy has huge demands in China, one of the countries suffering greatest aging population. In recent years, domestic banks, trust companies and other financial institutions have increasingly paid attention to the pension finance, and pension trust is nothing new to the market. Presently, most common products are consumption-driven pension trust products, i.e. providing investors with pension consumption service such as tour, hotel and medical services, which has lower investment threshold around 1,000 yuan. However, IB is the pioneer to launch financial pension trust product by applying market operation mechanism and investment management mechanism in pension finance via trust structure.

Essentially, aging population is a problem of finance. The old-age security mechanism in our country generally relies on basic old-age security system. With a large amount of population base, there is significant pension deficit, and market-oriented investment mechanism is just started, which takes some time to see the results. At present, individual account pension are managed mostly by exclusive financial account and local banks and subject to substantial shrinkage due to devaluation with limited bank interests and financial accounting interests. To solve old-age security problems, it is necessary to create a multi-layer and market-based pension finance system and develop multi-purpose pension products for different customers.   

Xu Weihui, GM of FOTIC said, “marketization of individual old-age security system means construct financial product rules according to market mechanism, taking risks and enjoying gains by a market-oriented assets management method. It shall be an innovation and attempt to solve the pension deficit in our country. The legal functions of independent property and risk isolation featured in Trust products could fully ensure the benefits of the beneficiaries, incomparable advantages to other assets management method.”

The financial pension trust is a proven operation model of pension internationally. ERISA of United States regulates that, to segregate pension property benefits and corporate bankruptcy, the pension of enterprises must be operated as trust except for insurances. In other words, employee pension will not be endangered even if its employer goes bankrupt. ERISA also regulates that trustee shall be an investment advisor or investment manager to guarantee the operation of investment management. In some South America and North Europe countries and regions, the pension authorities fully entrust the management of pension to private investment bodies which mostly have good investment performance and can guarantee the stable operation of pension. As a breakthrough attempt in this field across the country, Enjoyable Trust can supplement the shortage of social security system, commercial pension insurance and other traditional way of old-age security.

Pension trust means long term entrustment of wealth, and the key to pension products are safety. Xue Ruifeng indicated that, HNWIs have varied demands in finance and investment, and wealth management involves a serial of services including finance, law and tax, which require highly professional inter-disciplinary financial talents to tailor wealth planning and investment management plan for customers so as to realize the appreciation and sustainability of wealth. The staff in the professional team of IB Private Banking have over 10-year working experiences and master degree or above on average, and the qualification requirements for investment advisors directly serving customers are even more strict. “It is our consistent promise to serve customers with a loyal and professional 'spirit of contract',” he said.