Ministry of Labor and Social Security P.R.China Meeting of Directors of Social Security Organizations in Asia and the Pacific China’s old-age insurance: background, challenges and proposed measures Pi Dehai Ministry of Labor and Social Security P.R.China 2019/1/18

Contents of the Presentation Background Challenges and opportunities for China’s old-age insurance development Proposed measures 2019/1/18

1.Background In early 1950’s, China put in place an old-age insurance system compatible with the productivity level and economic system. Since 1980’s, the Government has made great efforts to reform the old-age insurance system, aiming at building one compatible with the socialist market economic system. 2019/1/18

1.Background old-age insurance for state organs and institutions Now China’s old-age insurance system consists of three parts: urban enterprise old-age insurance old-age insurance for state organs and institutions old-age insurance for rural areas 2019/1/18

1.Background Enterprise go entirely to their individual accounts Part of the contributions is used to set up social pooling fund Enterprise 20% Part of the contributions goes to the individual accounts Contribution go entirely to their individual accounts employee 8% 2019/1/18

1.Background Basic: 1/120 of the accumulation in the account 20% of the workers’ average wages in respective localities in the previous year Basic: Pension 1/120 of the accumulation in the account Individual account 2019/1/18

1.Background After 20 years of exploration, great achievements have been made. 2019/1/18

1.Background Adopting the old-age insurance model 1. 10 years ago, China replaced the pay-as-you-go under the basic old-age insurance with a partial funding by combining social pooling with individual accounts. 2019/1/18

1.Background 2. Expanding the coverage The basic old-age insurance is applicable to all urban enterprises, self-employed and people in flexible employment. 2019/1/18

1.Background 3. Establishing new funding mechanism   Costs are shared by multiple parties. 2019/1/18

1.Background Promoting socialized management 4. Since 2000, entrusted banks and post offices pay old-age pensions to the retirees. Since 2002, greater efforts have been given to socialized management of the retired. 2019/1/18

1.Background 5. Establishing a multi-layer system   In addition to participating in the compulsory basic old-age insurance, enterprises with suitable conditions may set up annuities for their employees. In addition, the state also encourages personal savings for old age. 2019/1/18

1.Background 6. Streamlining social security management   In March 1998, the Ministry of Labor and Social Security was established. 2019/1/18

1.Background 7. Undertaking experimental reforms   In 2001, the Chinese Government began to carry out pilot project of injecting funds into individual accounts in Liaoning Province. The pilot project was expanded to Jilin and Heilongjiang provinces in 2004. 2019/1/18

2. Challenges and opportunities Population ageing Urbanization Diversified forms of employment 2019/1/18

2. Challenges and opportunities Population ageing The ratio between the workers paying contributions and the pensioners decreased from 5:1 in 1992 to 3:1 in 2004. It is projected that in 2020 the urban dependency ratio will become 2.5:1. 2019/1/18

2. Challenges and opportunities Urbanization It is estimated that in 20 year’s time, China’s urbanization rate will rise from 40% to 60%. 2019/1/18

2. Challenges and opportunities Diversified forms of employment Along with the economic structure adjustment, deepening of enterprise reform and the change in economic ownership, a new employment pattern has taken shape. 2019/1/18

2. Challenges and opportunities The government attaches high importance to the issue The economy continues to develop There are social consensus and expectation from the public Intensified international exchange and cooperation continues 2019/1/18

3. proposed measures Injecting funds into individual accounts.                                                                                              Injecting funds into individual accounts. 2019/1/18

3. proposed measures Broadening the investment channels to preserve and increase the value of the funds.   2019/1/18

Expanding the old-age insurance coverage. 3. proposed measures Expanding the old-age insurance coverage. 2019/1/18

3. proposed measures Improving the formula for the basic old-age pension to form an incentive mechanism 2019/1/18

3. proposed measures Strengthening the fund regulation by raising pooling level 2019/1/18

Perfecting multi-layer old-age insurance system 3. proposed measures Perfecting multi-layer old-age insurance system 2019/1/18

3. proposed measures Reforming the old-age insurance system for state organs and institutions 2019/1/18

3. proposed measures Strengthening legal construction and management of old-age insurance. 2019/1/18

Thank You! 2019/1/18