Pension reform mapped out

Top authorities and experts have reportedly reached a consensus on the general reform path of China's pension system, including prolonging the period for people to pay their pension insurance to subsidize the funding shortfall, a topic that has come under heated public debate.

The proposals were reached at a closed-door meeting, amid multiple attempts to optimize the present pension system, reported the Beijing Times. However, there has been public opposition after it emerged that the new plan was similar to previous ones that suggested extending the retirement age or delaying the pension collection age.

Under the current system, people have to pay pension insurance for at last 15 years, while many work for a much longer period, which leads experts to believe that it is easier to prolong the paying period compared with other proposals, the Beijing Times reported Sunday.

Wang Jiangsong, a professor with the China Institute of Industrial Relations, told the Global Times that a more detailed interpretation is needed to prove the practicality and benefits of the proposed extension of the pension payment period.

Wang noted that the shortfall in pension funds is an issue left by historical factors and the proposed plans could only be a temporary solution.

China's current pension system was launched in 1992, before which pension funds for urban workers were paid entirely by their employers, mostly State-owned enterprises.

The system asked private sector employees to pay 8 percent of their salaries as pension insurance, while their employers pay another 20 percent for them. The shortfall accumulated as insurance paid by younger workers failed to make up for those who had already retired before 1992.

The Ministry of Human Resources and Social Security said in a report that there was a 2.4 trillion yuan ($393.6 billion) surplus in pension funds in 2012, but a report released by the Chinese Academy of Social Sciences in the same year claimed that 14 provinces' funds were 76.7 billion yuan in debt, prompting many to worry about the situation with China's aging population.

"To actually change the situation, those with vested interests must make a sacrifice. For example, civil servants must give up some of their benefits in the process," Wang said.

Those at the meeting also agreed that the pension gap between the public and private sectors should be gradually reduced, reported the Beijing Times.

Pensions for civil servants and employees of State-owned enterprises are funded by the government, while employees in the private sector have to pay the insurance together with their employers.

As a result, the latter could receive pensions equivalent to 40 to 60 percent of their monthly income before retirement, while the former can enjoy up to 90 percent.