Workers will have to contribute in pension scheme revamp

Pension funding shortfalls are causing mainland authorities to slash future retirement payouts for millions of government employees working for non-profit institutions and to force the workers to make contributions.

Human Resources and Social Security Ministry spokesman Yin Chengji said on Tuesday that a new pension-fund scheme would be launched soon that targeted all employees in state-run non-profit organisations in Shanghai, Chongqing , Guangdong, Shanxi and Zhejiang , the China Business News reported yesterday.

Under the pilot scheme, all employees of these institutions will contribute to their retirement plans, as will the employer - thereby replacing the fully subsidised government pensions of past decades. It will also impose pension cuts on cadres of government institutions at all levels and will eventually be extended to the rest of the country.

The report said there were more than 1.25 million such government institutions nationwide, employing more than 30 million people. Authorities were already paying out more than 100 billion yuan (HK$113.6 billion) in cadre pensions each year, a twentyfold increase from the 1990 total.

The State Council approved the plan last February as part of an effort to narrow the gap in the benefits received by workers for retired state-owned enterprises and those for employees of state institutions.

The new plan links retirement benefits to contributions. Regulations that will outline the specific requirements are expected to be released soon.