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Pension Fund Woes Could Mean Rise in Retirement Age
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The government is studying the feasibility of raising the mandatory retirement age to counter the worrying pension fund deficit, the China Economic Weekly reports.

The social security fund stood at 800 billion yuan (US$102 billion) in the red as 2006 dawned, compared to 36 billion yuan (US$4.6 billion) in 2000, the Chinese-language magazine said, citing a Ministry of Labor and Social Security document.

The magazine quoted unidentified ministry officials as saying that a proposal would be put forward to the higher authorities within a month on increasing the retirement age.

Guo Yue, a researcher with the All-China Federation of Trade Unions Research Center, attributed the shortfall to the retirement of many employees in their 40s or 50s, far earlier than the requisite age -- 60 for men and 55 for women, or 50 in some cases. Official statistics showed that in 2000, the average retirement age was 51.2.

Raising the legal retirement age would delay pension pay-outs thus enabling the pension fund to recover over time.

Zhang Hongmei, a bank employee who retired at 45 in 2003, said she is satisfied with the 1,200 yuan (US$153) monthly pension. Before retirement, she was paid 1,400 yuan (US$178) a month. Zhang and many others contributed less to the pension fund than if they had completed full working lives, but enjoy full pension benefits. The policy allowing earlier retirement was implemented in the mid-1990s, when state-owned enterprises were reformed.

Early retirement can alleviate short-term unemployment pressure, but over time, it will negatively impact upon social security and economic development in an aging society, according to the magazine.

According to the United Nations, China is becoming an aging society since the number of over-65s has exceeded 100 million, accounting for 7.7 percent of the population, rising to 10.5 percent for over-60s.

Shanghai is already considering asking senior technicians and engineers to continue working for five to 10 more years after reaching their retirement age, Shanghai Morning Post reported last week.

However, a central government official is reported to have told China Economic Weekly that raising the retirement age too fast would exacerbate unemployment.

The ministry estimates that at least 24 million urban residents need jobs each year with only 11 million openings. In addition, rural areas suffer from 100 million surplus laborers. "We need to balance pension fund needs and unemployment," said the official.

Worsening matters is that around 7.1 billion yuan (US$905 million) of the 2-trillion-yuan (US$255 billion) social security fund has been misappropriated, according to the National Audit Office.

Lengthening the working lives of professional talents would benefit both individuals and the country, says a signed article in Youth Daily.

Current regulations require male workers in factories to retire at 55 and female workers at 50, while male officials, engineers and professionals with special expertise retire at 60 and females at 55. The average retirement age in China stands at 51.2 years -- approximately 10 years younger than that of many other countries.

As a result, many people quit their jobs while both physically capable and very experienced, representing a tragic waste of talent to the nation's workforce.
From this perspective, allowing people to delay retirement would not only satisfy the need for talent, but would also fulfill the wishes of those wanting to extend their professional lives.

According to statistics from Shanghai, 78 percent of people with high-end professional expertise aged between 60 and 70 are invited back to work, with most willing to do so.

Such a phenomenon is not rare and has occurred now for close to two decades. Given this fact, it would be a practical move to face the reality and put off the retirement age.

More importantly, extending the professional life of high-end talent may also help prepare for the looming ageing population issue.

In the next 10 to 20 years, China will further become an ageing society. It would be inevitable for the country to put off people's retirement and keep them at work.

By extending the working time for part of the labor force as a pilot scheme, the authorities will find out what consequences this decision would incur, what problems may surface and gain precious experience for future decisions.

However, it remains that when retirement is put off this will worsen unemployment and make young people lose their jobs.

But sociological research also indicates that a social group may become prematurely physically and mentally senile if people retire too early. In essence, continuing professional activity promotes a longer and more active life. Moreover, setting the retirement age too low would add a heavy burden for the state and the working population to support the pension fund.

Admittedly, individual choices should be respected on the issue of retirement. While many people would like to work for another couple of years, others may want to enjoy their lives in retirement. Hence, another option is to set up a flexible retirement age.

(China Daily November 28, 2006)

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