Luo Yi, an analyst at Huatai Securities, said the policy would boost the stock market, especially blue-chips such as financial shares.

Wang Han, an analyst at Industrial Securities, global experience indicated a bright future of China's pension fund in stock market as the move will create long-term and stable returns for citizens.

The fund for retirees, which began operation in the early 1990s, has aroused concern as its annualized investment yield hovered as low as around 2 percent over the past several years, falling short of the consumer price index, a main gauge of inflation.

China's pension fund depreciated by nearly 100 billion yuan in the past 20 years, taking inflation into account, said Zheng Bingwen, an expert from the Chinese Academy of Social Sciences.

The stock market will help avoid the diminishing value of pension fund and stabilize the country's capital market, said Li Daxiao, chief economist with Yingda Securities.