In April 2022, the General Office of the State Council issued the "Opinions on Promoting the Development of Personal Pensions" (Guobanfa [2022] No. 7), launching the personal pension system to connect with basic pension insurance and enterprise (occupational) annuity to realize the supplementary function of pension insurance. On November 3, 2022, the Ministry of Finance and the State Administration of Taxation issued the "Announcement on Personal Income Tax Policies for Personal Pensions" (Ministry of Finance and State Administration of Taxation Announcement No. 34 of 2022) to clarify the tax issues of personal pensions. This article analyzes personal pension and tax issues.
1. What is a personal pension? A personal pension is a form of social security in which the individual bears all the contributions and opens an account at a financial institution that meets the regulations. The account funds are used to purchase financial products at the individual's own risk. The pension is paid to the individual when the participant meets the conditions for receiving it.
Personal pension is a supplementary form of basic pension insurance, and its participants are the same as the basic pension insurance, that is, workers in China who participate in the basic pension insurance for urban employees or the basic pension insurance for urban and rural residents. Personal pensions implement individual accounts, and all contributions are paid by individuals. The funds in the account are used to purchase bank financial management, savings deposits, commercial pension insurance , public funds and other financial products that meet the preferences of different investors that are safe, mature and stable, have standardized targets, and focus on long-term value preservation. Participants can also choose different financial products independently. The risk of purchasing financial products is borne by the individual investor, that is, the issuer of financial products does not promise guaranteed returns, and the state does not bear the responsibility for adding value and maintaining the value of personal pension insurance funds. When an individual does not use his personal pension to purchase financial products, interest will be calculated as a current deposit. Therefore, in terms of investment objects, it is similar to individuals purchasing financial products on their own. They are responsible for their own profits and losses and bear their own risks.
Personal pensions can be received monthly, in installments or in one lump sum when the participant reaches the basic pension age, completely loses the ability to work, settles abroad (border), or has other circumstances that comply with national regulations. The method of payment cannot be changed once determined. If a participant dies, the assets in his personal pension fund account can be inherited.
Personal pensions follow the principles of voluntary participation, government policy support, and market-oriented operation, so they have greater flexibility. For example, the amount of payment can be determined by oneself. The state sets the maximum limit at 12,000 yuan per year, and the limit can be adjusted in time according to economic development; individuals can choose the financial products they invest in and purchase; when they meet the conditions for receiving it, they can choose the method of receiving it, etc.
2. Tax policy for personal pensions
As a supplement to the basic pension, personal pensions aim to protect the income of the elderly after retirement, thereby providing preferential policies for tax exemption, tax reduction or tax deferral.
1. How to pay personal pension tax
When personal pension is paid by an individual, it is deducted from the comprehensive income or operating income based on the actual amount paid within the annual limit of 12,000 yuan. That is, the paid personal pension is exempt from personal income tax . It is consistent with the tax policy of employee basic pension insurance during the payment stage. In the investment process of personal pensions, the value-added and income obtained from the purchase of financial products by the pension are recorded into the personal account, and the individual actually obtains income. Personal income tax is temporarily not levied on this part of the income, and the deferred tax effect is obtained. When an individual meets the conditions for receiving a pension, the pension received by the individual will not be incorporated into the comprehensive income according to the "wage and salary income" item, and the personal income tax will be calculated and paid in full at a tax rate of 3%. This is different from the tax policy when receiving the basic pension. The basic pension insurance enjoys the preferential policy of full exemption from personal income tax when receiving the basic pension insurance.
2. Personal pension tax collection
Basic pensions are levied on workers. Personal pensions can only be deducted from labor income, that is, from comprehensive income or business income. They cannot be deducted from passive income, that is, income from property transfer, income from property rental, interest, dividends, bonus income and incidental income.
If an individual obtains salary income and withholds and prepays personal income tax in accordance with the cumulative withholding method labor remuneration income , the payment can choose to be withheld in the current year or deducted according to the actual limit when the settlement is settled in the following year. For those who obtain other income from remuneration for labor services, author's remuneration, royalties, , etc. or business income, their payments will be deducted within the actual limit when the settlement is made in the following year.
When an individual receives a personal pension in accordance with regulations, the commercial banking institution in the city where the personal pension fund account is opened shall withhold and remit the personal income tax payable by the individual.
3. Conclusion
The personal pension system is a supplementary means of pension and a measure for the country to build a multi-level and multi-pillar pension insurance system. It enjoys preferential policies of tax reduction, exemption and tax deferral. For those whose basic pension insurance cannot meet their needs, they may consider purchasing a personal pension as a form of supplementary pension insurance .
lawyers remind buyers that there are many differences between voluntary personal pension funds and compulsory basic pensions. When purchasing, you need to pay attention to: taxes need to be paid when receiving them, and they are not tax-free; personal pension accounts need to be managed by themselves, and investment risks are at your own risk when purchasing financial products. The bank has no guarantee guarantee; personal pension insurance funds cannot be collected in advance at will, etc.
(Writer: Wang Zixiang)
