Who benefits from the basic old-age insurance contribution subsidy policy for the disabled?

Abstract

The aim of this paper is to track the whereabouts of basic old-age insurance (BOI) contribution subsidies. Little research has paid attention to the misalignment between the implementation objects of subsidy policies and the actual beneficiaries. In recent years, local governments in China have followed a contribution subsidy policy to help persons with disabilities (PWDs) with lower life expectancies. This study applied an actuarial model to calculate the leakage rate of the BOI contribution subsidy. The primary data are from the life tables of the entire population and PWDs in K province in China in 2015. It was found that, under different booking interest rates, 35.27%–61.26% of the contribution subsidy for PWDs in the individual account will be inherited by their heirs, and under different discount rates, 18.21%–68.74% in the pooling account will be enjoyed by non-disabled participants. The policy of BOI contribution subsidy for PWDs failed to account for the shorter average life expectancy and the lower average income of PWDs and would result in a welfare loss for PWDs. Therefore, it was suggested that it should be replaced by a non-contributory pension policy for PWDs.