Abstract
Taking mortality distribution, surrender value, and tax relief factors into consideration, the authors construct an actuarial model for the influence of personal income tax deferred commercial pension insurance on changes in personal pension wealth and adopts a numerical simulation to deliver the corresponding changes in personal pension wealth to different initial insured age and different initial insured annual salary. In order to better measure the security level of the commercial pension insurance, the model for the net replacement rate of pension of the commercial pension insurance was further constructed. The results show that the effect of participating in the personal income tax deferred commercial pension insurance on the present value of personal pension wealth depends on the combined action of the initial insured age and the initial annual salary. Under the same insured age, because men retire later and work longer than women, men can obtain a higher accumulation of personal pension wealth than women. For insured persons with different income levels, high-income groups can obtain higher personal pension wealth growth, and although low-income groups cannot obtain higher personal pension wealth growth, they can obtain a significant increase in the pension replacement rate by participating in the insurance, thereby better guaranteeing their living standards after retirement. Regardless of the income level, tax relief can be obtained once participating in the insurance, but the value may vary. The optimal tax-saving age for men is 23 years old, and for women 25 years old.
Highlights
According to the United Nations accepted standard, a region with 10% proportion of people over 60 years old or a 7% proportion of people over 65 years old will be considered as an aging society.According to the National Bureau of Statistics, by the end of 2019, the number of people aged 60 and above reached 254 million, accounting for 18.1% of the total population, while the number of people aged 65 and above had reached 176 million, accounting for 12.6% of the total population, which has far exceeded the international standard
Some scholars build an actuarial balance model based on the replacement rate, and believe that an appropriate increase in the deduction limit can effectively increase the replacement rate of commercial pension insurance [20], while some other scholars suggest that, in order to maintain the scope of the benefit group under the old tax system, the personal income tax deferred pension insurance should minimize the tax rate at the post-retirement stage, and demonstrate that this will not lead to an increase in fiscal costs through actuarial models [21]
According to the requirements of China’s current personal income tax deferred commercial pension insurance Exempting Taxing (EET) model, commercial pension insurance can have an effect on the individual income tax of in 3 ways: the commercial pension insurance contributions Tax1, the investment returns from the commercial pension insurance accounts Tax2 and the withdrawal from the commercial pension after retirement Tax3
Summary
According to the United Nations accepted standard, a region with 10% proportion of people over 60 years old or a 7% proportion of people over 65 years old will be considered as an aging society. Some scholars build an actuarial balance model based on the replacement rate, and believe that an appropriate increase in the deduction limit can effectively increase the replacement rate of commercial pension insurance [20], while some other scholars suggest that, in order to maintain the scope of the benefit group under the old tax system, the personal income tax deferred pension insurance should minimize the tax rate at the post-retirement stage, and demonstrate that this will not lead to an increase in fiscal costs through actuarial models [21]. According to the current tax deferral policy, the authors analyze the tax relief brought by participating in the tax deferred commercial pension insurance, quantify the degree of tax incentives via constructing indicators such as gross tax savings and net tax savings rate, and calculate the individual benefits of participating in the insurance in terms of taxation.
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