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ECNS Wire

Expert urges pension reform over earlier-than-expected deficit

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2015-11-19 16:17Ecns.cn Editor: Feng Shuang

(ECNS) -- The latest data released by China's Ministry of Finance indicates a worrying deficit in the country's pension system, with an expert warning that the country's pension fund for enterprise retirees may drain in 10 years if the imbalance persists.

Official figures show that the yearly net income for pension of enterprise employees in 2014 stood at 1.8726 trillion yuan (about $290 billion) while the expenditure was 1.9045 trillion yuan, suggesting a gap of 31.9 billion yuan.

The growth rate of expenditure has for the first time outpaced that of income, breaking the trend of expansion since 2004. The turning point also came a year earlier than expected by Wang Dehua, an expert with Chinese Academy of Social Science. Meanwhile, the yearly balance has also been contracting since 2013 , with the pace accelerating in 2014.

Wang said in an interview with 21st Century Business Herald that the pension deficit is irreversible with a rising payment level and a fast-growing aged population, while a compulsory investment level based on average worker salaries remains low.

To bridge the gap, China may resort to previous reserves, which totals 34 trillion yuan. However, Wang estimates the money will run out around 2024 under current policies.

"We should fully understand the pressing situation and work out ways to reform the current system," he said.

A research team from the academy said some possible ways to change the situation include postponing retiree withdrawal and enhancing investment rates of current employees.

 

  

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