China to raise retirement age to ease pressure on pension fund

China to raise retirement age to ease pressure on pension fund

The pension fund has a shortfall of 1.3 trillion yuan (USD 194 billion), Zheng Bingwen, of the Chinese Academy of Social Sciences told state run 'China Daily' today.

To deal with both the pension system's problems and an ageing society, Zheng said China like France desperately needs to raise the retirement age.

Since life expectancy is increasing, many people can still work beyond 65 or even 70, something that is quite common in the West, he said.

"Besides, if there are more people working, more fortunes will be created and more money could be distributed to workers and retirees," he said.

Experts say that pension system of the world most populous country has to face the fact that people are getting old before they have made enough money to retire.

The country has a population of more than 1.33 billion, but only about 30 per cent of them are covered by the pension system, a report by the 'Daily' said.

Three out of 10 Chinese will be 60 years or older by 2040, a United Nations forecast said.
According to Lin Yi, a specialist in social security at Southwestern University of Finance and Economics, China's pension system is unlike those of many European countries and faces grave challenges from the population ageing and longer life expectancy.

That challenge, should not be underestimated, he said.

"The pension fund scale should be expanded because an aging population means that more people will want a pension after they retire," he said adding that the system be made to cover more people with more diversified investment forms to ensure its sustainability.

Shanghai city, which has the highest number of pensioners in China has already started trying out one such programme in October, where urbanites can delay receiving retirement benefits and continue working after retirement age.

Shanghai's old population is about twice the national average.

Senior residents now account for more than 20 per cent of the city's population and there are more than three million registered residents older than 60, according to official survey conducted recently.

In Shanghai, one retired worker is supported by 1.5 taxpayers, while the national average is 3.5 taxpayers for every retired person.

Some analysts estimate that if the retirement age were to be extended by a year, the social security funding shortfall would be cut by 20 billion yuan.

To maintain the pension system, Zheng Bingwen said a more unified system would help China avoid the risks that the dispersed pension system can pose.

"A multilevel system brings potential fiscal, social and even political risks," he said.

China's pension plan currently has four different modes of operation, which cover rural residents, civil servants, employees of public institutions and enterprise employees.

The more money Chinese workers put into their retirement account, the more they get after retiring, he said.

On an average, Zheng says, a civil servant can get twice as much as a company employee after retirement, and this is a possible hazard on the road to social stability.

"All people, whether they are civil servants, urbanites or rural people, should be covered by a unified pension scheme where pensions do not differ a great deal," he said.

The government plans to cover all residents with the pension system by 2020.