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China has unveiled a new plan to expand pension coverage — mainly by encouraging individual retirement accounts — in a move to shore up its welfare system.
The current pension scheme has fallen behind the needs of China's graying population and left self-employed people, migrant laborers and many others without coverage, Liu Yongfu, vice minister of Ministry of Labor and Social Security, said at a news conference yesterday in Beijing.
The reform measures will extend retirement pension coverage to more workers in urban businesses, self-employed people and those who have no fixed jobs.
"Large numbers of urban self-employed people and people with no fixed jobs have not participated in the system," Liu said.
Under the new plan, this group of people will enjoy preferential policies including subsidies to encourage them to join the system.
The reform also aims to streamline the operations of the pension system to enhance its appeal and boost the pool of funds.
Under the existing system, a worker receives benefits after contributing to his or her account for 15 years. Even if he or she works longer than that and has invested more in the account, the benefit will not increase.
"The practice is unfair," said Liu. "In addition, it fails to conform to the situation facing retired workers."
Liu said Chinese workers live an average 25 years after their retirement from the job. Under the existing system, however, they can draw money from their accounts for only 10 years before their funds are exhausted.
Lack of enthusiasm to invest in the accounts has resulted in an insufficient pool of funds, which makes it difficult for the system to grow in a sustainable way.
In some parts of the country, some retired workers can't draw the full amount from their accounts because of the lack of money in the pool.
"The reform aims to ensure that if a person works longer and contributes more to his or her account, he or she will get more after retirement," said Liu.
According to the ministry, 173 million people participate in the corporate old-age pension system, compared with 112 million in 1998.
Since 1998, the labor and social security administrative departments have redoubled efforts to ensure the timely and full payment of old-age pensions to retirees, Liu said.
Officials worry, however, about a long-term shortfall.
(Shanghai Daily December 16, 2005）
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