SCIO briefing on China's employment and social security

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Yin Weimin, minister of human resources and social security

Hu Kaihong, vice director-general of the Press Bureau, State Council Information Office

Feb. 29, 2016

Ta Kung Pao:

The media have more than once reported on the top-level design of the pension system carried on by the Ministry of Human Resources and Social Security and other relative departments. Could Mr. Yin please introduce the design? Also, how is it going? Thank you.

Yin Weimin:

The pension system is considered a safe network for the people’s livelihood and a stable factor of society, because everybody expects to be cared for when as they become old so that their worries can be alleviated. The pension system in our country was established in the 1990s, which has, generally speaking, made huge progress in three aspects over the past more than 20 years.

First, the framework has taken shape. Our country’s pension system consists of dual platforms -- urban and rural.

Second, the population incorporated in the system has been expanding. The twin platforms have presently covered 850 million residents. The system is designated for a certain group of people whose number is estimated at about 1 billion, excluding preschool and school children and teenagers, rather than for full coverage. The pension system currently covers 850 million people with a coverage rate of 85 percent is the largest single pension plan in the world.

Third, the benefit has increased. The urban pension insurance for the retired working class has increased for 11 years in a row from 700 (US$106) in 2005 to 2,200 yuan in 2015.

I believe the achievement made in the building of the pension system in our country over the past two decades is marvelous compared to the evolution of the systems in developed countries over a span of dozens of years or even more than 100 years. However, we still need an objective view concerning the pension system which requires institutional improvements in pursuit of fairness and sustainable development. Moreover, a graying society is the biggest challenge posed to the system. Different from the social insurance which has run in reciprocal ways, the pension insurance for retired people is afforded by the payment of the present employees. However, with the ratio of the present labor force to retired people declining from 3.3 to 1, to 2.9 to 1, the sustainability of pension insurance has been challenged in view of the severe prospect affecting not only China, but also the rest of the world. As things stand, reforms are inevitable for all of us. We are now engaging in making a top-level design of pension insurance to push for the reform of the pension system.

The reform revolves around a number of aspects. First, the overall population eligible for the pension system is encouraged to join the insurance plan. Pension insurance can generally cover all, including, particularly, the migrant workers and those with flexible occupations which account for 100 million people in the country, for the purpose of fairness.

Second, we’ll continue to balance the distribution of pension insurance across the country as we shift from the present provincial management to unified national operation in order to address surpluses and deficiencies on a wider scale and fend off risks.

Third, we’ll improve personal accounts to make it work better with incentive and restrictive plans.

Fourth, we’ll roll out policies to postpone the retirement age in phases.

Fifth, we’ll manage the investment of pension funds to maintain and increase their values.

Sixth, we’ll collect the pension funds from a variety of areas. In particular, we’ll transfer state-owned assets to the pension pots to pay off the historical debts owed to the funds covering very old retired people and people retired amid the establishment of the pension systems. The pension of those people should be financed by fiscal revenues or state-owned enterprises to cover debts.

Seventh, we need to build a multilayer pension system. Apart from pension insurance, we can also introduce annuities, occupational annuities and commercial insurances for a multilayer pension system. Some of those reforms have been carried out, such as the “Measure on the Investment and Operation of Pension Funds” issued by the State Council, followed by a number of other policies to be implemented one after another.

I believe those will be our comprehensive reforms with a slew of policies which are crucial to the sustainability of the pension insurance, safety of operations and a guarantee for the livelihood of the people as they get old.

There is one more point I want to add. If those measures can be taken into effect, the rate of the social insurance premiums can be lowered as long as the payments guarantee distribution. Thank you.

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