Third pension system to help aging population

Pensions are projected to rise this year, as the government explores a flexible policy to push back the retirement age and establish an additional pension system.

The moves are designed to cope with the increasing percentage of seniors in the population.

Pensions rose an average of 5 percent annually from 2018 to 2020, plus 4.5 percent in 2021, according to the Ministry of Human Resources and Social Security and the Ministry of Finance.

Growth this year is estimated to be around 3 percent, experts said.

"The nation has an adjustment system for pensions that takes account of the rise in salaries of the employed and price inflation," said Pang Shi, director of the department of employment and entrepreneurship at the Chinese Academy of Personnel Science.

She said that pension increases let people share the good results of reform and economic development, and improve their sense of happiness, though the economic slowdown due to the COVID-19 epidemic did slow the nation's economy and reduce the size of last year's pension adjustment.

"The nation has borne a great shock brought by the novel coronavirus epidemic in 2020, with economic growth of 2.3 percent that year and people's average salary rising only by 4.3 percent," Pang said.

"Also, the base amount of the pension has changed after experiencing 17 years of consecutive increases. That's why we've seen differences in pension growth these years."

The number of people aged above 60 will surge during the 14th Five-Year Plan (2021-25) period.

"The number of seniors will increase by around 8.7 million in 2022, and will keep growing by tens of millions after 2023, causing a surge in retirement and the collection of pensions," Pang said. "That will bring a series of challenges for labor shortfalls and social security."

In the past few years, the government has been considering postponing the retirement age and establishing a diversified insurance system.

According to the human resources ministry, the nation is making efforts to build up a third pension system in addition to the State pension fund and supplementary pension.

You Jun, vice-minister of human resources and social security, said at a news conference last year that the basic pension fund covers nearly 1 billion people nationwide, and about 58 million people joined the supplementary pension.

He said that the third pension system will get financial support from the central government while being operated by the market.

"Building up a diversified insurance system is an important action to cope with the aging problem and promote the sustainable development of the pension system," he said.

Pang said that implementing an incremental postponement of the retirement age is a good way to improve the economy and relieve pressure on the current pension fund, which can help enhance the sustainability of the insurance system.