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China releases rules on national pension fund to ensure safety

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(Bloomberg) — China released rules governing its national pension fund to ensure the safety of the retirement pool that has expanded to 1.5 trillion yuan ($230 billion) since it was created 16 years ago, as the population ages.

The pension fund, financed by the central government budget, state capital transfers and its own investment returns, is reserved for social-security expenditures as the number of elderly peaks, according to the rules published by the State Council on Monday. The National Council for Social Security Fund should base its management of the fund on safety, profitability and long-term principles, according to the statement.

The new rules take effect on May 1. They relate to the role of the fund, who manages it, the responsibilities of the manager, supervision and legal responsibilities.

The rules may speed up the pooling of provincial pension funds to be managed by the Beijing-based National Council after their investment scope was widened last year, according to Huatai Securities Co.

The government last year broadened the investment scope of regional pension funds beyond bank deposits and government bonds, and allowed provincial governments to entrust parts of their local pools with the national fund’s manager after setting aside enough to pay pensioners.

The national pension fund, which can invest as much as 40 percent of its assets in stocks, recorded an average annual return of 8.82 percent since inception, beating inflation by 6.5 percentage points, the government said in a statement Monday.

The national pension fund started with 20 billion yuan in 2000.