China unifies pension system

By Dai Tian (chinadaily.com.cn)

Updated: 2015-01-14 17:53

Senior citizens chat at a retirement home in Beijing. [Photo/Xinhua]

Public institutions will have to start contributing 20 percent of employees' salary to their pension fund and develop an annuity arrangement, according to the country's latest reform.

The current dual pension system has reached its final stage, the official website of the Chinese government unveiled. The new reforms are expected to "increase fairness" in the pension system the website wrote.

This is the first time that the public sector has shared a unified pension system with enterprise retirees. According to the guideline, employees of public institutions need to pay 8 percent of their salary as a pension premium.

China has the largest senior population in the world, with 194 million people at or above the age of 60, according to the China National Committee on Aging.

Pension reform was first launched in 2008 as a pilot program in various provinces and municipalities including Guangdong province and Shanghai.

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40m govt employees face pension reform

About 40 million members of government, Party, and public institution staff will be affected by the reform of China's pension system.

China's Vice-Premier Ma Kai on Tuesday reported on the social security system at the ongoing bi-monthly session of the National People's Congress (NPC) Standing Committee, saying the basic idea is a pension system for public employees with the same qualities as those urban retirees from enterprises.

Changes to occupational annuities and the salary system will be made simultaneously nationwide, Ma added.

China has the most public employees in the world. As the population is expected to reach 1.43 billion in 2020, the State Council wants a pension system that covers the whole population.

Ma said the government hopes to cover 900 million people by 2017, and 1 billion in 2020, raising the coverage rate from the current 80 percent to 95 percent.

In the past two decades, China's public pension systems used different methods of payment, accounting and management, which resulted in widespread disputes.

The monthly pension for retired civil servants and staff in public institutions were 2.1 and 1.8 times the common pension level of 1,900 yuan, according to the the Ministry of Finance's fiscal science research institute.

Private urban employees pay for their pension before retirement and usually get a pension equal to about half of their final salary, but public workers get much more without making any financial contribution at all.

Background of reforming pension system

The aim of the pension reform is to build a system for the Party, government and public institutions that is similar to the one employed by the private sector so as to break the long-held dual system.

Under the dual pension system, the employees in a state agency can get 80 to 90 percent of their salary after retirement while the employees of an enterprise may only get 40 to 60 percent.

It means the pension of 37 million public servants and employees in state agencies in China will not be provided fully by the government and will have to contribute the same amount to their pensions as employees do in enterprises.

Pension reform has been stuck in the past few years as pilot programs in places, including Guangdong province and Shanghai municipality, have come to a standstill after they were launched in 2008.

Experts' view

Su Peike, researcher with University of International Business and Economics' Public Policy Research Institute:

Reform is necessary as it's a matter of bridging the gap and realizing the equality. However, challenges remain.

There's still a gap to be filled in China's pension system and the focus should be on that and also on finding a way to manage the pension system in the future under the new policies and defining the proportion of financial supplement, as well as making plans for delayed retirement.

Tang Jun, secretary Public Policy Research Institute of Chinese Academy of Social Science:

The reform will not affect the salaries of employee's in state agencies as the wages will be adjusted as they need to pay for their own pensions.

Zheng Gongcheng, Renmin University of China:

The pension was previously paid from fiscal funds, which is unfair. The reform pursues justice in pension systems for different groups of people. Despite of a reduction in pensions, occupational annuities for the affected staff will help prevent sharp losses.

Chen Bulei, the Southwest University of Political Science and Law:

Occupational annuity will ease the worries of the 40 million staff affected.

Opinions on social networks

The reform is the most-discussed topic on Chinese social media site Sina Weibo, and the hashtag "pension reform" was used 18.5 million times as of 15:50 pm Wednesday.

Jasmine-muomuo:

I have been waiting forever for this new policy, I'm hoping for a raise in the salary after the reform because currently it's too low.

Dapengkantianxia gave thumbs up:

If you want to enjoy social security, you have to pay for your own, no matter if you are a government official or a private enterprise employee. This is more fair.