Re­forms can for­tify old-age in­sur­ance plan

China Daily (USA) - - VIEWS -

China has es­tab­lished an in­sti­tu­tional old-age in­sur­ance frame­work cov­er­ing work­ers and res­i­dents. The em­ploy­ees’ ba­sic pen­sion in­sur­ance sys­tem com­bines so­cial funds and per­sonal ac­counts for 380 mil­lion work­ers na­tion­wide. It has also es­tab­lished a ba­sic old-age in­sur­ance sys­tem that cov­ers 500 mil­lion ur­ban and ru­ral res­i­dents.

To­gether, the two old-age in­sur­ance plans cover 880 mil­lion peo­ple. Based on the es­ti­ma­tion that China has about 1 bil­lion peo­ple above the age of 16, the coun­try’s old-age in­sur­ance plans’ cov­er­age rate is about 88 per­cent.

In 2008, the ac­cu­mu­lated bal­ance of the two old-age in­sur­ance funds was 992.5 bil­lion yuan ($149.07 bil­lion), which in­creased to 4.40 tril­lion yuan last year, in­di­cat­ing the strong pay­ment ca­pac­ity of old-age in­sur­ance funds. Although in some prov­inces and re­gions the growth rate of ba­sic old-age in­sur­ance funds has been lower than the growth rate of ex­pen­di­ture, the re­verse is true in oth­ers. Which means the ac­cu­mu­lated bal­ance of China’s ba­sic oldage in­sur­ance funds will con­tinue to rise.

The ba­sic pen­sion in­sur­ance funds of en­ter­prises play a dom­i­nant role in the fund­ing of China’s ba­sic old-age in­sur­ance sys­tem. Ac­cord­ing to last year’s data, even if the au­thor­i­ties were to stop col­lect­ing old-age in­sur­ance pre­mium to­day, the ex­ist­ing old-age pen­sion funds could still pay pen­sion na­tion­wide for more than 17 con­sec­u­tive months. Hence, ex­perts gen­er­ally be­lieve China has enough ca­pac­ity when it comes to pay­ing old-age pen­sion.

As the bal­ance of na­tional ba­sic old-age in­sur­ance fund has risen to more than 4 tril­lion yuan, there is no rea­son to fear about a short­age of pen­sion in­sur­ance funds. But this as­sur­ance should not stop the au­thor­i­ties from tak­ing mea­sures for the sus­tain­able and healthy de­vel­op­ment of the ba­sic old-age in­sur­ance sys­tem.

China’s ag­ing so­ci­ety, in­creas­ing pres­sure of eco­nomic down­turn and slow­ing growth rate of fis­cal rev­enue mean it will face ris­ing pay­ment pres­sure on its pen­sion in­sur­ance fund in the fu­ture. But the au­thor­i­ties have taken sev­eral mea­sures to cope with this pres­sure.

First, they have es­tab­lished a na­tional so­cial se­cu­rity strate­gic re­serve fund with a mar­ket value of 2 tril­lion yuan to sup­ple­ment em­ploy­ees’ ba­sic pen­sion in­sur­ance funds and cope with the sub­se­quent pres­sure of pen­sion pay­ment ne­ces­si­tated by a rapidly ag­ing so­ci­ety.

Sec­ond, they have also es­tab­lished an in­vest­ment mech­a­nism for em­ploy­ees’ ba­sic pen­sion in­sur­ance funds, in or­der to pre­serve and in­crease the value of pen­sion in­sur­ance funds.

Third, they have al­lo­cated par­tial State-owned cap­i­tal to make up for the cost of trans­form­ing the pen­sion in­sur­ance sys­tem.

And fourth, the cen­tral lead­er­ship has asked gov­ern­ments at all lev­els to take up the re­spon­si­bil­ity of pay­ing full old-age pen­sion in time.

Now, the au­thor­i­ties should The au­thor is a pro­fes­sor of law at Wuhan-based Zhong­nan Uni­ver­sity of Eco­nom­ics and Law. fur­ther im­prove the ba­sic pen­sion in­sur­ance sys­tem for em­ploy­ees. So­cial pool­ing should be raised from the pro­vin­cial to the na­tional level so as to cre­ate a fair com­pe­ti­tion en­vi­ron­ment for en­ter­prises and cor­rect the im­bal­ance among prov­inces and re­gions. Also, the au­thor­i­ties should grad­u­ally raise the re­tire­ment age, unify pen­sion in­sur­ance pre­mi­ums, and take nec­es­sary mea­sures to solve the prob­lems re­lated to the pre­mium pay­ment pe­riod.

In other words, although the old-age in­sur­ance sys­tem is im­prov­ing and the old-age in­sur­ance fund is be­ing ef­fec­tively op­er­ated, re­forms in the sec­tor should be deep­ened and ac­tive mea­sures taken to guar­an­tee the sus­tain­able and healthy de­vel­op­ment of the sys­tem.

... re­forms in the sec­tor should be deep­ened ... to guar­an­tee the sus­tain­able and healthy de­vel­op­ment of the sys­tem.

The au­thor is di­rec­tor of the So­cial Se­cu­rity Re­search Cen­ter af­fil­i­ated to the Cen­tral Uni­ver­sity of Fi­nance and Eco­nom­ics.


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