Pension reform should avoid invisible inequality
- By Zhang Yan
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E-mail China.org.cn, January 15, 2015
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The unified pension reform should avoid creating another double-track system. |
The latest pension reform, directed at scrapping the double-track system that has long been criticized for favoring public employees, was ratified by China's central government on Dec. 23.
If the reform goes smoothly, a unified and integrated pension system will be built, and more money can be tapped to close the yawning pension fund gap that totaled 170.2 billion yuan (US$27.4 billion) in the country's 19 provinces in 2013.
But the reality is that a complete and unified pension system cannot be achieved overnight. In the initial stage of reform, pension funds are still divided into different pools for different purposes, among which there are no transactions.
The compensation given to public employees - who have personally paid little toward their pensions in decades - for going through the system's transformation will cost the government enormously in both the short and long terms.
The differentiated funds designated for different classes of employees in the first phase of the reform will result in different substitute ratios, or the proportion of pre-retirement incomes paid out as post-retirement income. The substitute ratios of government officials will undoubtedly be higher than those of average employees even though the reform is intended to create a unified pension system.
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