Find ways to fill social insurance gap

The gap in China's social security insurance fund is stirring concerns that the retirement age may be postponed to 65, says an article in 21st Century Business Herald. Excerpts:

Authorities said that, as more people reach retirement age, the gap will be bigger in the future.

Some economists' reports showed that China's social security insurance gap hit 16.48 trillion yuan ($2.62 trillion) in 2010, and if the system is not changed the figure will reach 68.2 trillion yuan by 2033, accounting for 38.7 percent of the GDP then.

The main reason behind the gap is that some State-owned enterprises didn't pay enough pension insurance for retired workers. So the authority has to pay these groups of people with money from the accounts of the working population.

To solve the problem, it would be advisable for the relevant SOEs to fill the gap by transferring shares or setting aside part of their net profits for social insurance accounts. Local governments should also take some of their income from land transfers to supplement the fund.

The proportion of the enterprises' profits and governments' income that should be taken out should be fixed by law.

The central authority has already indicated it will consider inviting commercial insurance agencies to manage the medical care insurance funds to help not only maintain its value, but also increase its value as much as possible. Similar initiatives can also be applied to the social security insurance funds.

So before deciding to postpone the retirement age, authorities should exhaust every possibility to fill the gap first and implement a scientific management of the funds.