Reverse mortgages face scepticism in China
Observers warn that reverse mortgages to fund twilight years face an uphill battle for acceptance in a traditional society
The State Council's backing for reverse mortgages to supplement old-age pensions has reignited a debate over whether traditional attitudes are flexible enough for the scheme to gain traction.
The programme has proven popular in other countries such as the United States, and some Chinese cities have already tested the waters. The leadership published a proposal on September 14 to launch pilot scheme, possibly next year, but media outlets have warned the nation might not be ready for it.
Under the "home for pensions" plan, people over 60 can use their homes as collateral in return for a fixed sum every month or for care at a nursing home.
Beijing hopes reverse mortgages can bolster retirees' incomes as the national pension system struggles with the graying population.
The National Council for Social Security Fund said 1.1 trillion yuan (HK$1.38 trillion) was under management at the end of last year, up from 838.6 billion yuan in 2011. But according to Cao Yuanzheng, chief economist at the Bank of China, the pension financing gap will hit 68.2 trillion yuan by 2033, from about 16.5 trillion yuan in 2010.
The Workers' Daily interviewed several elderly about the scheme. They were largely sceptical, saying the bank could become insolvent before they died. In any event, property should be left to one's children, they said. "It's not I alone who can make a decision on the property," one person said. "What would my children think?"