State-owned enterprises are facing a pension crisis as worker contributions diminish and scheme obligations rise, according to the China 2020 report. The World Bank warned that some enterprises had more pensioners than workers and were occasionally forced to stop pension payments. It recommended an overhaul and the introduction of a 'three-pillared' approach that would combine a basic state pension, mandatory 'top-up' contributions and an optional supplementary pension. Private pension funds and insurance companies would offer these optional accounts. Problems with the existing structure have arisen due to the type of scheme inherited from the era of central planning. They were typically pay-as-you-earn plans offering defined benefits covering workers mainly from urban areas. In some areas, the responsibility for payments has been assumed by local governments paying pensions from pooled funds. The report states: 'The system is untenable. Firms with more pensions still make a larger contribution to the pension pool and are still responsible for most of the payments, administration and the health and housing needs of pensioners.' This makes it difficult to close down bankrupt firms and makes viable operations less competitive. The lack of scheme portability hampers worker mobility and further hinders state enterprise reform. The bank has called for restructuring of the system and an overhaul of the way the funds are managed. It states: 'How such arrangements are put in place requires careful consideration, because the funds will be managing huge sums.' By 2030, the accumulated surplus could reach 13 trillion yuan (about HK$12.07 trillion). Annual inflows of new money could top 500 billion yuan.
