The pension system in China is administered and regulated by municipal authorities in accordance with guidelines issued by the central government. Under these guidelines, provincial and certain municipal authorities may introduce regulations (such as contribution rates) that differ from one another.

The system  consists of two pillars: (i) a basic pay-as-you-go, social insurance program funded by employer contributions (up to 20% of payroll, depending on local government regulations) and government subsidies; and (ii) individual accounts funded by employee contributions (8% of gross insured earnings) and government subsidies.

Demographers and pension experts have concluded that increasing the retirement age is necessary in Shanghai, which has a rapidly aging population and a pension fund with rapidly rising deficits. Shanghai has the largest share of the aged population among Chinese cities, about twice the national average. There are more than 3 million residents older than age 60, more than 20% of the city's population.

In order to ease the fiscal burden on Shanghai’s pension system, on October 1, 2010 Shanghai's Human Resources and Social Security Bureau launched a trial program that entitles workers to defer retirement beyond the mandatory retirement age of 60 (for men) and 50 (for women). Under the trial program, employers must sign new employment contracts with workers who elect to defer retirement. Further, if they choose to defer retirement both workers and employers must continue to contribute for pensions and work injury benefits but may stop contributing for sickness, maternity, and unemployment.

Currently, the trial program is limited to private-sector employees with certain technical skills, but it will be extended to other groups of employees. The government expects this measure will ease the fiscal burden on the city's pension system from a rapidly aging population: between 1993 and 2009, the ratio of workers to retirees in Shanghai's pension system decreased from 2.8:1 to 1.4:1.


Article with courtesy of Social Security Online


Sources:Social Security Programs Throughout the World: Asia and the Pacific, 2008; IBIS Country Manual, China (Shanghai) 2010; "The Chinese Pension System: First Results on Assessing the Reform Options," European Economy (Economic Papers) 412, June 2010; "Shanghai Opens Door to Delayed Retirement," China Daily, September 29, 2010; "City Trying to Bridge Pension Gap," South China Morning Post, October 9, 2010; "Pressure Grows on Shanghai Pensions," Shanghai Daily, October 20, 2010; CIA World Factbook, China, October 28, 2010; IBIS News, China (Shanghai), October 29, 2010.

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