Pension fund woes could mean rise in retirement age

The government is studying the feasibility of raising the mandatory retirement age to plug the huge deficit in the pension fund, the China Economic Weekly reports.

The social security fund was 800 billion yuan (US$102 billion) in the red at the end of last year, compared to 36 billion yuan (US$4.6 billion) in 2000, the Chinese-language magazine said, citing a Ministry of Labour and Social Security document.

The magazine quoted unidentified ministry officials as saying that they would put forward a proposal on raising the retirement age to the higher authorities within a month.

Guo Yue, a researcher with the All-China Federation of Trade Unions Research Centre, attributed the shortfall to the fact that many employees retire in their 40s or 50s, much earlier than the requisite age 60 for men and 55 for women, or in some cases, 50.

Raising the legal retirement age will delay the payment of pension, according to experts.

Official statistics showed that in 2000, the average retirement age was 51.2.

Zhang Hongmei, a bank employee who retired at 45 in 2003, said she is happy with the 1,200 yuan (US$153) monthly pension. Before retirement, she was paid 1,400 yuan (US$178) a month. Zhang and many others contributed less to the pension fund than they would have if they had retired at the prescribed age; but enjoy full pension benefits. The policy allowing earlier retirement was implemented in the mid-1990s, when State-owned enterprises were reformed.

Early retirement can alleviate some unemployment pressure in the short term, but over time, it will negatively affect social security and economic development in an aging society, according to the magazine.

According to the United Nations, China meets all the criteria of an aging society the population over 65 has exceeded 100 million, accounting for 7.7 per cent of the total; and the population over 60 accounts for 10.5 per cent of the total.

Shanghai is already considering allowing senior technicians and engineers to continue working for five to 10 more years after they reach their retirement age, Shanghai Morning Post reported last week.

However, a central government official is reported to have told China Economic Weekly that raising the retirement age too fast would exacerbate the unemployment situation.

The ministry estimates that at least 24 million urban residents need jobs each year, but there are only 11 million openings. In addition, there are also 100 million surplus labourers in the rural areas. "We need to balance pension fund needs and unemployment," said the official.

Making matters worse is that about 7.1 billion yuan (US$905 million) of the 2-trillion-yuan (US$255 billion) social security fund has been misappropriated, according to the National Audit Office.

China Daily

Lengthening the working lives of professional talents would benefit both individuals and the country, says a signed article in Youth Daily. An excerpt follows:

It is reported that the government is considering revising regulations on the retirement age.

The current regulation stipulates that male workers in factories retire at 55, female workers retire at 50, while male officials, engineers and professionals with special expertise retire at 60 and females in this category retire at 55. Average retirement age in China is 51.2 years 10 years younger than that of other countries.

As a result, many people have to quit their jobs when they are both physically capable and very experienced. This is a waste of their talent as well as a loss for the nation.

From this perspective, allowing people to put off their retirement would not only satisfy the need for talent, but would also fulfil the wish of these people to extend their professional lives.

According to statistics from Shanghai, 78 per cent of people with high-end professional expertise aged between 60 and 70 are invited back to work, and most of them are willing to do so.

Such a phenomenon happens in many other places and it has a long tradition dating back one or two decades.

Given this fact, it would be a practical move to face the reality and put off the retirement age.

More importantly, extending the professional life of high-end talent may also help prepare for the ageing population issue that is looming.

In the next 10 to 20 years, China will become an ageing society. It would be inevitable for the country to put off people's retirement and let them stay at work.

By extending the working time for part of the labour force, the authorities will find out what consequences this decision would incur, what problems may surface and how to solve the problems, drawing precious experience for future decision-making.

There is the opinion, however, that when retirement is put off it will worsen unemployment and make young people lose jobs.

But sociological research also indicates that a social group may become prematurely senile both physically and mentally if people retire too early. Moreover, setting the retirement age at a low level would add a heavy burden for the State and the working population to support the pension fund.

Admittedly, individual choices should be respected on the issue of retirement. While many people would like to work for another couple of years, others may want to enjoy their lives in retirement. Hence, another option is to set up a flexible retirement age.

Source: China Daily