Beijing has launched new policies to bolster personal contributions to China’s age pension funds as well as stabilise payment adjustments.
On 23 January China’s Central Leading Group for Comprehensively Deepening Reforms approved the “Guidance Opinions for Establishing Urban-Rural Basic Age Pension Insurance Payment Confirmations and Basic Pension Standard Adjustment Mechanisms (关于建立城乡居民基本养老保险待遇确定和基础养老金正常调整机制的指导意见), in order to address standardise adjustments to pension levels.
Data from the Ministry of Human Resources and Social Security indicates that as of the end of June 2017 a total of 508.65 million people were signed up with China’s age pension funds, of which 153.75 million were drawing funds for a per capita pension of 122 yuan, or less than half the minimum welfare standard for Chinese rural communities in 2016.
Zheng Chunrong (郑春荣), professor at the Shanghai University of Finance and Economics, said to 21st Century Business Herald that “the establishment of stable, regular adjustment mechanisms for pensions will on the one hand be of benefit to enabling both the young and elderly to share the fruits of economic growth, and be of benefit to the elderly having, clear and stable expectations of future growth in their basic pensions.
“In this way when economic growth eases, the elderly will have no need to be concerned about a slowing rate of increase in their pension payments.
“On the other hand, the Ministry of Finance will also be able to better ascertain future payment pressures, and make effective budgetary preparations.”
China’s pension system has undergone a slew of reforms over the past decade, starting with the launch of the “new model rural age pension insurance” trials in 2009 (新型农村社会养老保险), followed by urban resident age pension trials in 2011, and culminating in the establishment of a unified urban-rural pension system in 2014.
The “State Council Opinions Concerning the Establishment of a Unified Urban-Rural Basic Age Pension System” (国务院关于建立统一的城乡居民基本养老保险制度的意见) envisages the “comprehensive establishment of a fair, unified, standardised urban-rural pension system by 2020.”
While the Opinions make reference to “timely adjustments to nationwide pension minimums on the basis of economic growth and price changes,” this standard has not been adjusted once in the past three years.
In sharp contrast the urban professional pension was increased 10% in 2015, 6.5% in 2016 and 5.5% in 2017.
In addition to standardising adjustment mechanisms for China’s aged pension payments, the new set of guidance opinions seeks to raise the level of personal contributions made.
In 2016 China’s urban-rural basic pension funds posted revenues of 293.3 billion yuan, for a year-on-year increase of 2.8%, while expenditures were 215 billion yuan, for a year-on-year rise of 1.6%, and a total balance of 538.5 billion yuan.
Personal contributions to China’s urban-rural basic pension funds were just 73.2 billion yuan, accounting for roughly 25.0% of total fund revenues.
Government subsidies to pension funds rose to 206.5 billion yuan, accounting for approximately 70.4% of revenues, to remain north of the 70% threshold for the second consecutive year.