China rolled out a private pension plan on April 21 to complement the nation's current pension system, in its latest effort to tackle the challenges of an aging population.

According to the circular, the private pension plan should be suitable for national conditions, underpinned by policies, optional for individuals, and run by the market, to form a multi-pillar old-age pension system, along with basic pension insurance and enterprise annuities.

Chinese citizens covered by basic pension insurance for urban employees or by basic pension insurance for urban and rural residents are eligible to take part.

Participants should first have their own individual pension accounts set up, and could contribute up to 12,000 yuan (about $1,872) annually to the accounts that would be subject to closed-end management, according to the guidelines.

The government will offer tax incentives to encourage participation in the new system, the guidelines said.

The funds in the accounts can be used to purchase financial products, savings deposits, commercial endowment insurance, public funds and more.

Pensioners are allowed to draw their money on a monthly basis, in batches, or all at once if they reach a certain age, lose the ability to work, settle abroad, or meet other corresponding requirements. In case of death, the assets left in the accounts can be passed on to heirs.