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The Pain of a Pension Deficit (6)

(Beijing Review)

08:53, August 24, 2012

Wrong answer

Pressure on the pension fund system has forced discussion on the possibility of raising the retirement age.

The aging population is a challenge faced by the whole world. At present, people in the United States and Germany retire at 65-67 years old, but in China, men retire at 60 and women at 50 or 55.

The present policy of retirement age adopted by China was set in the 1970s. Forty years have passed, during which life expectancy of the Chinese people has risen by seven years, but the retirement age keeps unchanged.

According to the MOHRSS, if the retirement age is raised by five years, 20 billion yuan ($3.17 billion) of pension fund shortfall can be made up. Retiring later, a worker can pay longer into the pension fund system and draw more pensions after retirement.

However, just raising the retirement age is not enough to solve this growing pressure. Even raising the retirement age, till 2050 government fiscal subsidy to make up for pension fund shortfall will still account for 9.9 percent of the national budget each year. Moreover, compared with the present shortfall of 2.2 trillion yuan ($349.2 billion), making up for 20 billion yuan ($3.17 billion) of shortfall every year is peanuts and cannot change the fact that the shortfall is expanding.

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