Details of the reform of the old-age insurance system

The reform of China's urban pension insurance system has gone through three phases: the traditional system phase before the Third Plenary Session of the Twelfth Central Committee; the pilot and implementation phase of social integration after the mid-1980s; and the phase after March 1995 combining social integration and individual accounts. Of the three phases of reform of the pension insurance system, the three principle provisions put into effect after the issuance of the State Council Circular on the Reform of the Pension Insurance System for Enterprise Employees in March 1995 were of real reform significance, with the central element being the transformation of the pension insurance system from a pay-as-you-go system to a model combining social coordination and individual accounts. Beginning in 1997, China accelerated the pace of reform of the urban pension insurance system. This stage is the period when the reform of China's pension insurance system has developed the fastest and achieved the most obvious results. In recent years, the progress of the reform of China's urban pension insurance system has been mainly in the following areas: (1) the unification of the basic pension insurance system for enterprises and employees; after the State Council issued the Decision on the Establishment of a Unified Basic Pension Insurance System for Enterprises and Employees in 1997, localities conscientiously organized the implementation of the decision, basically realizing the uniformity and standardization of the proportion of contributions by enterprises and individual employees, the size of individual accounts and the method of calculating the basic pension, and realizing the new basic pension system. In 1998, the State Council decided to transfer the coordination of pension insurance for 11 industries, such as railroads, electric power, post and telecommunications, and petroleum, to the localities for the implementation of territorialized management, rationalizing the social insurance management system and enhancing the function of provincial-level coordination, which has played a positive role in ensuring the payment of pensions. (2) The coverage of basic urban pension insurance has continued to expand; at the end of 2003, the number of people participating in basic pension insurance nationwide amounted to 155.06 million, an increase of 7.7 million from the end of the previous year, of which 116.46 million were insured employees and 38.6 million were insured retirees, an increase of 5.18 million and 2.52 million from the end of the previous year, respectively. The number of insured enterprises nationwide amounted to 138.82 million, an increase of 6.03 million over the previous year, of which 103.25 million were insured employees and 35.57 million were insured retirees, an increase of 3.95 million and 2.08 million respectively over the end of the previous year. Basically, pensions have been paid in full and on time. In accordance with the requirements of the CPC Central Committee and the State Council, social insurance agencies at all levels have always made it their central task to ensure that the pensions of retired persons are paid in full and on time, and have paid close attention to their implementation. By raising and implementing funds through various channels, strengthening the foundation of their work, and establishing a system of monthly reports and key inspections, they have basically managed to pay pensions in full and on time. (3) Breakthroughs have been made in the work of socialized management services for enterprise retirees. In order to further reduce the social burden on enterprises, social insurance agencies at all levels have lost no time in launching the work of socialized management services for enterprise retirees. The Ministry of Labour and Social Security has identified 100 cities throughout the country to carry out pilot projects, convened symposiums on socialized management services in various parts of the country, and sent out working groups to supervise the work, and through these efforts, breakthroughs have been achieved in the socialized management services work; in 2002, 14.34 million enterprise retirees nationwide were provided with socialized management services, and the rate of socialized management reached more than 40 per cent. By the end of 2003, the number of enterprise retirees under socialized management had reached 29.33 million, an increase of 14.99 million over the end of the previous year, and the socialized management rate had reached 84.5 per cent. (5) A basic pension adjustment mechanism has been established, and the level of pensions for enterprise retirees has continued to rise. Over the past few years, the State has issued a series of policies and measures to continually improve the pension adjustment mechanism and raise the pension levels of enterprise retirees. The average monthly pension level for enterprise retirees has risen from 415 yuan in 1997 to 625 yuan in 2002, an increase of 50 per cent. In raising the basic pension levels of enterprise retirees on successive occasions, attention has been paid to tilting the benefits in favor of some of those who retired early and whose pensions were at lower levels, thus better safeguarding their basic livelihoods. (6) The pilot program for improving the social security system in cities and towns is progressing well; in 2000, the State Council formulated the Pilot Program on Improving the Social Security System in Cities and Towns, and in July 2001, a pilot program was launched in Liaoning Province. The main contents of the pilot program are to adjust and improve the pension insurance system, to implement the basic pension insurance individual accounts for active employees, and to accumulate part of the fund for coping with aging. from July 2001 to the present, important progress has been made. (7) The collection and payment of basic pension insurance premiums has been remarkably effective. in 2003, the national basic pension insurance fund earned 368 billion yuan, an increase of 16% over the previous year. Of this, 304.4 billion yuan was collected and paid in, an increase of 19.3% over the previous year; financial subsidies at all levels to the basic pension insurance fund amounted to 53 billion yuan, of which 47.43 billion yuan was subsidized by the central government; the expenditure of the basic pension insurance fund nationwide amounted to 312.2 billion yuan in 2003, an increase of 9.8% over the same period last year. At the end of the period, the accumulated balance of the basic pension insurance fund was 220.7 billion yuan.

But with the demographic changes and the advance into the population aging society, to China is still in the transition period of the social pension insurance system has brought a great challenge, revealing a lot of urgent need to solve the problem:

1. Pension insurance fund hidden liabilities heavy burden

Pension insurance fund hidden debt is one of the important reasons is that the aging of the population, the second reason is the ageing of the population, and the second reason is the ageing of the population. increasing day by day, and the second reason is the transition cost. The cost of transferring the track includes: the old people who have reached the retirement age in the new system did not fulfill the obligation to pay contributions but to enjoy the right to receive pensions; employees who have reached middle age did not fulfill the obligation to pay contributions before the establishment of the new system but to enjoy the right to statutory pensions after the retirement age. This creates a gap between the pension income and expenditure of the two kinds of people, which directly constitutes a hidden debt of the pension fund. In the process of reform, the reality of responsibility between the traditional retirement pension system and the basic pension insurance under construction cannot be delineated because the government has not explicitly borne the cost of the transition in the reform process. Historical imbalances in the burden between different regions, i.e. between old industrial bases and new cities, have resulted in abnormally high and low basic pension insurance premiums in each region. For example, enterprises in old industrial bases such as Wuhan pay more than 24% of gross wages for basic pension insurance, while enterprises in the Shenzhen Special Administrative Region pay only 6% of gross wages, a difference of 18 percentage points. This imbalance has directly worsened the competitive environment between regions, and at the same time, the historical burden of the old industrial bases, for lack of channels to absorb it, has made self-responsibility dependent only on a very high contribution rate, and has not been able to meet the increased demand for pensions brought about by the growth of retired personnel. As a result, some regions can only use individual account funds to make up for the shortfall, thus turning individual accounts into empty accounts, and the new system of combining accounts into a system of running empty accounts. According to statistics from the relevant departments, by the end of 2002, the size of the empty individual accounts accumulated by domestic pension funds was more than 480 billion yuan. If the possible future inflation is not controlled, there is no major improvement in corporate contributions, coupled with the dramatic increase in population in the next few decades, there will be difficult to pay the problem, much less to achieve the goal of meeting the accumulation of pension funds.

2. The legislative level is not high, the binding force is not strong, and the construction of the legal system is obviously lagging behind

Pension insurance essentially belongs to the redistribution of national income, and the specific institutional arrangements will inevitably involve the sharing of responsibilities between the government, enterprises and individuals, and the adjustment of the interests of different social groups or interest groups. Only by the legislature on behalf of public opinion to make laws, can truly centralized reflection of the will of the state in the pension insurance, and has the supreme authority and mandatory. At present, the macro-development strategy of China's social pension insurance has basically taken shape, but the legal basis for building China's pension insurance system is still the Labor Insurance Regulations of the 1950's. Although the government has also promulgated a series of laws and regulations, as well as rules and notices, etc., the form of these legislations is more policy-oriented, frequently changed, and lacks the mandatory, authoritative, and continuous nature that legal norms should have. Therefore, China's pension insurance system reform and institutional construction urgently need to introduce a new, authoritative, mandatory and continuity of the Pension Insurance Law, in order to clarify the rights and obligations of the government, enterprises and individuals, to maintain the seriousness of the law.

3. The family model of old-age pension has been impacted

With the increase of overall income level and the change of social structure, the culture of the traditional Chinese big family has been changed. For example, according to the results of the fifth population census, the average household size was 3.44 persons, a decrease of 0.52 persons from the 3.96 persons in the fourth census, and a decrease of 0.97 persons from the 4.41 persons in the third census. Of the households with one elderly person over 65 years of age, 16% were single elderly households. Of the households with two elderly persons, 42% were single elderly couple households. Another manifestation of the challenge to the traditional concept of family is that due to the fact that only children are more pampered by their parents and develop self-centered personalities compared to the previous multi-child families, their sense of natural personhood to take on the responsibility of supporting the elderly in adulthood is greatly diminished. In addition, due to the implementation of decades of the state through the enterprise to underwrite the workers' pension insurance system, in the conditions of the transition of the pension system, many families do not have a pension insurance plan, or even do not realize the adequate savings for old age.

Four key measures to deepen the reform of the urban pension insurance system

1. Make up for the hidden debt, and make the individual account solid

Making up for the hidden debt of the pension insurance fund not only requires a large amount of funds, but also has far-reaching effects. Practice has proved that trying to use the pension fund to repay the historical debt is not feasible, the government should take this responsibility, feasible ways to include the sale of part of the state-owned assets, the issuance of long-term special bonds, fiscal spending and other means. On the basis of making up for the hidden debt, the current individual accounts for pension insurance should be gradually made real, so as to achieve the goal of accumulation. Separate management of the individual account fund and the socially coordinated account fund should be implemented separately through different organizational structures and in accordance with different management methods, so that the respective responsibilities of the Government and individuals with regard to old-age issues can be clarified, while at the same time avoiding the misappropriation of funds between the socially coordinated account and the individual account. It is also required that the individual account fund adopt a full accumulation system, which can only be used when the individual retires.

2. Continuously exploring new investment methods and fields of the pension insurance fund

Under the current realistic conditions of the fund's small size, the fund's unsound operation and management mechanism, and the immaturity of the capital market, the adoption of the policy of purchasing treasury bonds as the mainstay of the fund is reasonable, but there is also a need to explore the combination of the capital market with the pension insurance fund's investment methods and fields. Allow the pension insurance fund to carry out appropriate investment portfolio and appropriately relax the investment field. According to the survey in Yantai, Shanghai and other places, the current pension insurance fund value-added rate is generally about 5%, higher than the same period of bank deposit interest rates, in addition to the management costs, there is still a certain amount of accumulated balance. If the appropriate relaxation of investment areas, can further increase the surplus rate. At the same time, can try to implement the investment entrustment agency system, part of the pension insurance fund entrusted to the specialized investment institutions for investment, can improve the value-added rate of the accumulated funds, but also promote the development of the capital market. It is worth noting that the social insurance administration and fund management organizations should strengthen communication and collaboration with the investment authorities and investment institutions, but should also maintain the autonomy and independence of the social insurance administration, because the maintenance of security of the pension insurance fund, as the most important social insurance public **** back-up fund, is still the most important, and is also the basic responsibility of the social insurance administration.

3. Strengthening the legalization of social pension insurance

Industrialized countries and many developing countries in the establishment and reform of the social pension insurance system, usually with the legislature to formulate or amend the relevant laws and regulations as a precursor to the management department to develop the corresponding implementation of the rules as a condition, and then the specific organization of the implementation. China's social pension insurance legislation has been more than 100 years later than the western developed countries, from the trend of accelerated development of population aging, accelerating the pace of China's social pension insurance legislation appears to be more important and urgent than at any time in history. At present, China should promulgate as soon as possible the Social Pension Insurance Law, Social Insurance Law, Basic Pension Insurance Regulations and other laws and regulations, so that the construction and reform of the social pension insurance system to further embark on the legalization and standardization of the track.

4. Actively promoting the construction of urban pension insurance informationization

Full-scale launching of the "Golden Insurance Project", the establishment of centralized resource databases covering all insured persons and units in cities under its jurisdiction, and the extension of the municipal network to the windows of the business offices and the relevant service agencies. The construction of the social insurance data center has been completed, realizing the interconnection of one city in a province and one province in the central government, transmitting on-line data on the monitoring of old-age insurance premiums, and completing the prototype of the national network.

5. Emphasizing the fundamental role of family insurance in the institutional arrangement

Pension is the ****same responsibility of the individual, family and society. Family insurance is not only in line with China's thousands of years of historical and cultural traditions, but also the realistic pattern of Chinese society. The function of family insurance can be maintained and even amplified through the implementation of relevant welfare policies, such as providing policy concessions and even subsidies for family old age. For example, Taipei City has designated 2002 as the Year of the Cherished Family, and has supplemented and expanded the inadequacy of family insurance through a series of policies such as the family stress reduction policy, the family health policy, the family diffusion policy, and so on, which have been well received by the public and have yielded good results. Therefore, in the institutional arrangements to pay attention to the basic role of family insurance, choose the appropriate home and family income transfer, so that it becomes an important supplement to the basic old-age insurance, but also to make up for our country in a longer period of time the insufficiency of the low level of insurance and limited coverage.

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