Core Insights - The second pillar of pension, primarily consisting of enterprise annuities and occupational annuities, is crucial for addressing aging population challenges and enhancing national pension security [1][11] - The development of enterprise and occupational annuities is seen as a necessary transition from a single state responsibility to a tripartite responsibility shared among the state, enterprises, and individuals [1][11] - The recent implementation of personal pension systems and supporting policies has created a favorable environment for the expansion of the second pillar [1][11] Group 1: Market Dynamics - The enterprise and occupational annuity market is entering a phase of steady expansion, with occupational annuities achieving full coverage due to reforms in public sector pensions [2][3] - The investment management model for occupational annuities is centralized, ensuring safety and regulatory compliance, while enterprise annuities follow a decentralized decision-making approach [3][4] - The scale of occupational annuities has grown from 1.29 trillion yuan in 2020 to 3.11 trillion yuan in 2024, with a stable year-on-year growth rate of around 20% since 2022 [3][4] Group 2: Investment Strategies - Pension funds are increasingly entering the market, adopting a "barbell" investment strategy that balances stable cash flow assets with high-growth sectors like technology and manufacturing [4][5] - The proportion of equity investments in enterprise annuities is expected to rise from 10%-15% to 20%-25%, potentially adding around 500 billion yuan in equity investments [4][5] Group 3: Structural Challenges - The pension system faces imbalances, with the first pillar being dominant while the second pillar, particularly enterprise annuities, has low coverage rates [8][11] - As of the end of 2024, the total scale of enterprise annuities reached 3.64 trillion yuan, with a year-on-year growth of 14.11%, while occupational annuities reached 3.11 trillion yuan, growing at 21.48% [8][11] - The participation rate in enterprise annuities remains low, with only 3.24 million participants, representing less than 10% of the basic pension insurance participants [8][11] Group 4: Future Outlook - The expansion of enterprise annuities is expected to continue, particularly among small and medium-sized enterprises, supported by policies aimed at reducing participation barriers [27][28] - By the end of 2028, the scale of enterprise annuities is projected to reach 6.4 trillion yuan, with average annual growth rates of 15.1% for accumulated funds and 6.5% for participant numbers [27][28]

Investment Rating - The report maintains an "Outperform" rating for the non-bank financial and insurance sector [3]. Core Insights - The second pillar of the pension system, primarily composed of enterprise annuities and occupational annuities, is steadily progressing and is crucial for addressing the challenges of an aging population and enhancing national pension security [1][10]. - The growth rate of annuities is expected to maintain an annual compound growth rate of 8%, which is higher than the projected nominal GDP growth [1][2]. - The occupational annuity system has achieved full coverage due to reforms in public sector pension insurance, while enterprise annuities are expanding from state-owned enterprises to stable private enterprises [2][10]. - The investment strategy for annuity funds is shifting towards a "barbell" structure, balancing between high-dividend, low-volatility assets and investments in sectors with growth potential, such as technology and manufacturing [2][10]. Summary by Sections Current State of Pension System - The pension system in China has evolved into a multi-pillar structure, with the first pillar being the basic pension insurance, the second pillar consisting of enterprise and occupational annuities, and the third pillar being personal and commercial pension insurance [11][16]. - As of late 2024, the basic pension insurance has accumulated a surplus of 8.72 trillion yuan, with a year-on-year growth rate of 11.55% [13][15]. Enterprise Annuities - The enterprise annuity market has seen significant growth, with the investment operation scale reaching 3.64 trillion yuan by 2024, reflecting a year-on-year growth of 14.11% [13][15]. - The number of enterprises establishing annuities peaked in 2014 and has since seen a decline in growth rate, indicating a potential stagnation in new enterprise participation [31][33]. Occupational Annuities - Occupational annuities have rapidly developed due to their mandatory nature, with a projected investment operation scale of 3.11 trillion yuan by 2024, growing at a rate of 21.48% [13][15]. - The occupational annuity system is characterized by a centralized management model, which enhances operational efficiency and market influence [2][10]. Investment Strategies - Annuity funds are increasingly entering the market, with a focus on optimizing asset allocation to achieve long-term value growth amidst challenges such as declining interest rates and reduced supply of non-standard assets [2][10]. - The report anticipates that the equity allocation in enterprise annuities will rise from the current 10%-15% to 20%-25%, potentially adding around 500 billion yuan in equity investments [2][10].

Core Viewpoint - The current pension system in China requires exploration of new insurance models, emphasizing the importance of including urban and rural residents in discussions about pension reforms [1][2]. Group 1: Current Pension Landscape - Over 50% of pension recipients are receiving urban and rural resident pension insurance, indicating a need to include this demographic in pension reform discussions [2]. - There are over 300 million private laborers and individual workers, along with more than 200 million flexible employment individuals, who have low pension insurance coverage [2]. - The rise of digital economy and flexible employment is leading to a shift in traditional employment patterns, necessitating new approaches to pension coverage [2]. Group 2: Structural Insights - The status of the resident pension insurance system should be a key criterion for evaluating the first pillar of the pension system [4]. - The three pillars of pension insurance should not be viewed as equal or independent; rather, the first pillar is foundational, and without it, the second and third pillars cannot effectively function [4]. - The development of artificial intelligence is expected to bring revolutionary changes, necessitating a rethinking of pension insurance models and the establishment of effective sharing mechanisms for productivity gains [4].