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SOCIAL SECURITY

Beijing expected to announce major reforms to national pension scheme

PUBLISHED : Friday, 18 October, 2013, 11:29pm
UPDATED : Saturday, 19 October, 2013, 12:56am
 

The mainland is close to announcing long-awaited reforms to its pension system, whose assets are estimated to have already fallen US$3 trillion behind projected future payouts, as it seeks to create a sustainable safety net for its rapidly ageing population.

The reforms, which may be announced this month, could include merging separate state and private sector employee pension schemes, increasing coverage and broadening the range of assets that pension funds are invested in to boost returns and improve efficiency.

Two sources with knowledge of the discussions said that plans to begin merging civil servant and private sector pension schemes, and taking the latter out of local government control, could be announced among the first round of measures. But this would require overcoming opposition from civil servants.

Centralising pensions into national funds would improve the efficiency of resource allocation and smooth regional disparities that currently result in some provinces having pension surpluses while others have huge shortfalls, analysts say.

Zheng Bingwen , the director of the World Social Security Research Centre at the Chinese Academy of Social Sciences, said merely changing the level of government that administers the system would be the "slackers' option" when deeper structural reform was required.

"Which of these two paths the government ends up taking depends on the determination of policymakers," he said in an interview in
The
Beijing News.

The sources said another possible reform was changing how the private sector system, the largest pension stream by assets, invested its funds.

Under pilot reforms in Guangdong, the National Social Stability Fund has run its investment since March 2012 in place of local governments, which are only permitted to invest in government bonds or park funds in low-interest-bearing bank accounts.

By 2035, according a report by Tsinghua University released in August, every two to three workers will support one dependant.

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