Official: China's pension system has problems
(Xinhua)
Updated: 2005-12-15 15:55

With the aging of the population, diversified forms of employment and development of urbanization, China's ongoing basic old-age insurance system doesn't go in line with the social and economic development, said a Chinese official here Thursday at a press conference by the State Council Information Office.

The system has not covered a large number of individual businessmen and persons in the form of flexible employment, said Li Yongfu, vice minister of Ministry of Labor and Social Security.

Another problem is, he said, the method of benefit calculation and payment is not so reasonable and there is lack of incentive and restriction mechanism for participation and paying contribution.

The adjustment mechanism for basic old-age benefit is not perfect and the overall pension level is quite low, said Liu, noting that a relatively low level of social pooling has resulted in a weak risk sharing across the pooling areas.

And, given the fact that the development of the country's occupational pension lags behind, the multi-tier old-age insurance system is not yet in place.

"All of these affect the sound operation and sustainable development of the system, which needs further reform and improvement," he said.

Basic old-age pension to reach 400 bln yuan

The basic old-age pension payment will reach 400 billion yuan (US$50 billion) in 2005, said Liu. The amount of basic old-age pension was only 151.2 billion yuan in 1998.

Since 1998, the labor and social security administrative departments at various levels have redoubled efforts to ensure the timely and full payment of old-age pension to retirees," Liu added.

The pension arrears decreased from 600 million yuan a month in 1998 to 300 million yuan in 1999, and 100 million yuan in 2000. There were 132 million yuan arrears occurred in some localities in 2003, he said.

In recent years, there was no more new pension arrears, he stressed.

At the same time, localities were active in finding solutions to pay out the arrears occurred in the past, he said.

Liu said the coverage of social insurance has been extended to enterprises of diversified ownership while the number of insured has been on rise, up from 112 million in 1998 to 173 million in 2005.

Among the insured, the number of individual businessmen and persons in the form of flexible employment grew from 5.35 million to 19.3 million, Liu said.

The net annual increase of retirees in recent years reached 3 million and an increasing number of retirees have benefited from the basic old-age pension scheme. In 2005 the number of pensioners amounts to 43.5 million, he said.

The multi-channel funding mechanism has been initially taken shape, which has provided financial security for the full and timely payment of pension benefits, Liu said.

The contribution collection has been enforced, which guaranteed the major resource of the old-age pension benefit, Liu said.

The amount of contribution expanded from 135.3 billion yuan in 1998 to 425 billion yuan in 2005 with average increase rate of 17.8 percent yearly.

In order to fill up the deficit of old-age pension fund, financial expenditures were adjusted at all levels of government, Liu said.

The central financial department has continuously increased the scale of transfer payment to support the old-age pension schemes in central and western provinces as well as old-industrial bases, he said.

The amount increased from 2.4 billion yuan in 1998 to more than 50 billion yuan this year. At the same time, the local financial departments have accordingly increased their input, he said.

As a strategic reserve, the National Council for Security Fund was established in 2000 and the fund has accumulated 180 billion yuan to date.