China’s pension system: achievements, challenges and future developments

Abstract

This study focuses on the framework and achievements of China’s pension system, and analyses the long-term risk and institutional dilemmas. Because the existing pension system does not clearly define the responsibilities among the government, the market and the individuals, the main challenge facing China’s current pension system is the huge future fund gap and the difficulty in coping with the risk of an ageing population. The proposal for China’s pension scheme reformation is to establish a three-pillar pension system: transfer the social pooling account into a public pension as the first pillar; merge the refilled personal account by transferring the state-owned assets and the enterprise annuity into the occupational pension as the second pillar; and promote the tax deferral individual pension plan as the third pillar. The roles and functions of the government in the three-pillar pension system are different: for the first pillar, it is fully responsible for the system construction, management and funding security; for the second and the third pillar, it is responsible for system construction and operational supervision.