China will soon start a new era of "private pensions" with the imminent implementation of a relevant mechanism, according to a report by the Shanghai Securities News published on Wednesday.

The new mechanism, which is characterized by policy support from the government, voluntary participation and market-oriented operations, will be an important transformation of the current pension system that has a basic pension insurance and a corporate pension.

According to the report, those who contribute to the basic pension insurance for workers in cities and towns, as well as in the life insurance system for urban and rural residents can participate in the private pension system.

They can open their own private pension account and deposit money as they wish. The accounts can be opened at qualified commercial banks or through other designated financial institutions. The accounts have closed-end management and participants cannot draw the money in advance unless under exemptions specified in the regulations.

The report also disclosed that the cap of private contributions should be 12,000 yuan ($1,869) per year. The government might adjust the cap based on economic development standards and how China's pension system develops in the future.

In order to encourage participation in the private pension system, authorities might consider formulating relevant preferential tax policies. For example, capital in private pension accounts might be allowed to be invested in certain financial projects that have a safe operation and tilt toward long-term value preservation, like banking wealth management products, deposits and public funds, among other.

It is likely that the system will be first tested in certain cities for one year before being implemented nationwide.

China's problem of an aging population has become increasingly acute in recent years. According to an expert from the Chinese Academy of Social Sciences, China's elderly population (above 65 years old) will account for more than 20 percent of the entire population by 2035, and 43 percent by 2050.