China mulls increasing retirement age
8 Jun 2012 1:45 AM GMT
Facing demographic problems with swelling ranks of people above 60 years, China plans to embark on pension reforms which include increasing the retirement age. Chinese government agency has revealed that it would propose a more flexible pension system to keep a balance between employment and expected shortfall in retirement payments, state run Xinhua reported. In China most men retire at 60 and women at 50.
And China is facing a ballooning deficit in the country's retirement pension funds due to an aging population. Almost all employees in China, in both private and state-owned organizations, have an individual pension account, into which both employee and employer have to make a monthly contribution. The employee can not withdraw any funds until he retires. However, in line with current contribution ratio, the pension funds can only pay women about 40 per cent of their working wage monthly for 15 years after retirement.
‘From an academic view point, to gradually raise the retirement ages is an inevitable choice due to increasing life expectancy,’ Zheng Chenggong, a professor with Renmin University of China, told Xinhua on Wednesday.
Some say raising the retirement age would only worsen the unemployment situation since generally labour supply has been exceeding demand in China.
‘If the retirement ages remains unchanged, the current pension system will be unsustainable in the future,’ said Zheng Bingwen, a researcher with Chinese Academy of Social Sciences.
According to recent studies China would be saddled with over 440 million old people in the next four decades. The increase of old people disrupting the demographic cycle was largely blamed on the one child policy being adopted for the past three decades.
China's population was expected to hit 1.45 billion in 2020 from the current 1.34 billion, according to State Population and Family Planning Commission.
Currently about 13.26 per cent of China's population are aged 60 or above at present. It is expected that the ratio will hit one third, or 440 million, by 2050, which means that one fifth of the population would be 80 years of age or older in 2050, it said. Although the ministry did not clarify a detailed plan of a more flexible pension system, experts say two possible scenarios were being considered.
The first scenario was to allow employees to continue working and getting paid for several years after the retirement age, which would increase their incomes and reduce the pension fund's outward payments. ‘In this case, it will definitely put more pressure on the unemployment situation,’ said Lu Jinghai, a member of the Chinese Academy of Labour Studies. 'The government has to create more new jobs for young employees.’
The second scenario was to delay employees' time to collect their pensions, which means an employee has to continue contributing to his pension account after retirement and collect it several years later.
This scenario could create more uncertainty and even more financial burdens to the already retired and the lay-off employees. Allowing for negative immediate repercussions the proposal could cause, experts suggest that any reform to the retirement and pension system should be conducted step by step.
‘The government should keep a good balance between the interests of the employed and the unemployed as well as the employed and the retired,’ said Prof Zheng Chenggong, ‘to reform the system in a progressive manner will better maintain social fairness.’
‘China should have an equal retirement age of 65 by the year of 2050,’ Zheng said, ‘generally speaking, to raise retirement age is a long-term trend’.
And China is facing a ballooning deficit in the country's retirement pension funds due to an aging population. Almost all employees in China, in both private and state-owned organizations, have an individual pension account, into which both employee and employer have to make a monthly contribution. The employee can not withdraw any funds until he retires. However, in line with current contribution ratio, the pension funds can only pay women about 40 per cent of their working wage monthly for 15 years after retirement.
‘From an academic view point, to gradually raise the retirement ages is an inevitable choice due to increasing life expectancy,’ Zheng Chenggong, a professor with Renmin University of China, told Xinhua on Wednesday.
Some say raising the retirement age would only worsen the unemployment situation since generally labour supply has been exceeding demand in China.
‘If the retirement ages remains unchanged, the current pension system will be unsustainable in the future,’ said Zheng Bingwen, a researcher with Chinese Academy of Social Sciences.
According to recent studies China would be saddled with over 440 million old people in the next four decades. The increase of old people disrupting the demographic cycle was largely blamed on the one child policy being adopted for the past three decades.
China's population was expected to hit 1.45 billion in 2020 from the current 1.34 billion, according to State Population and Family Planning Commission.
Currently about 13.26 per cent of China's population are aged 60 or above at present. It is expected that the ratio will hit one third, or 440 million, by 2050, which means that one fifth of the population would be 80 years of age or older in 2050, it said. Although the ministry did not clarify a detailed plan of a more flexible pension system, experts say two possible scenarios were being considered.
The first scenario was to allow employees to continue working and getting paid for several years after the retirement age, which would increase their incomes and reduce the pension fund's outward payments. ‘In this case, it will definitely put more pressure on the unemployment situation,’ said Lu Jinghai, a member of the Chinese Academy of Labour Studies. 'The government has to create more new jobs for young employees.’
The second scenario was to delay employees' time to collect their pensions, which means an employee has to continue contributing to his pension account after retirement and collect it several years later.
This scenario could create more uncertainty and even more financial burdens to the already retired and the lay-off employees. Allowing for negative immediate repercussions the proposal could cause, experts suggest that any reform to the retirement and pension system should be conducted step by step.
‘The government should keep a good balance between the interests of the employed and the unemployed as well as the employed and the retired,’ said Prof Zheng Chenggong, ‘to reform the system in a progressive manner will better maintain social fairness.’
‘China should have an equal retirement age of 65 by the year of 2050,’ Zheng said, ‘generally speaking, to raise retirement age is a long-term trend’.
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