China’s state pension plan needs retooling as slowdown, ageing population hit retirement pot
China’s ageing population is increasing the pressure on the state pension deficit at the same time employers are falling behind on their contributions. A deeper economic slowdown could burn a bigger hole in the retirement pot, experts say.
The cumulative balance in the pool stood at about 5 trillion yuan (US$712 billion) at the end of 2019, and the employers’ contributions were expected to fall short by 417.4 billion yuan due to measures to ease their burden, vice finance minister Yu Weiping said.
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The government will raise its subsidies so that payment can be disbursed to retirees in full on a timely basis, Yu added last week. Premier Li Keqiang last year cut the employers’ contribution rate to 16 per cent from 20 per cent to cope with challenges as the economy grew at the slowest pace in 20 years.
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The shortfall suggests the retirement system is unsustainable as the ageing demographic worsens in the coming decades, according to Renee McGowan at Mercer.
“The government does have to look at raising the retirement age” despite it being a globally unpopular topic, she said. “You can’t have a retirement system that is for half of your life.”
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