The largest component of social insurance is China's pension or old age fund that helps support citizens after their retirement. It is currently in crisis as the country is rapidly aging beyond the scope of the fund. Retired Chinese are expected to number 248 million in 2020. This is partially a result of the "one child" policy. In order to make sure that basic pensions are paid, extensive reforms are being completed.

The Ministry of Human Resources and Social Security administers the pension fund. It is responsible for national labor polices, standards, regulations and managing the national social security.

Qualifying Conditions

Age of Eligibility

The retirement age is:
60 for men (55 for men workers in the hazardous industries)
60 for women in professional capacity (55 for nonprofessional salaried women or 50 for other categories of women)

Early pension can be applied for if aged 50 (men) or age 45 (women) with at least 10 years of coverage and if assessed with a total disability.

In Beijing, a residence-based monthly welfare pension is granted to both urban and rural residents who have reached retirement age but are not covered under a pension program.

Contributions

The employee and the employer contribute to the system on a monthly basis. The portion contributed by the employee goes into a personal fund (the contribution directly accrues to the individual) and after retirement the individual can draw on the funds in this pool directly. The contributions made by the employer go into a social pool. Funds in this pool are distributed to all citizens that have made contributions into the system during their working life. In this way even citizens that have used up the personal portion of their pension will have some income on which to support themselves.

Insured person - contribute 8 percent of gross insured earnings. The minimum earnings used to calculate contributions are 60 percent of the local average wage for the previous year. The maximum earnings used to calculate contributions vary, but may be as much as 300 percent of the local average wage for the previous year.
Self-Employed Person - contribute about 8 percent of the local average wage.
Employer - The maximum contribution is 20 percent of payroll, depending on local government regulations. Contribution rates vary among provinces.

Rural pilot pension: A tax-financed contribution of 55 RMB per month per insured person has recently been offered. The central government pays the total cost of the scheme in the central and western regions; the partial cost of the scheme in the eastern region.

Benefits

A minimum of 15 years's (not necessarily continuous) contribution is required to receive benefits. These are calculated as 1 percent of the average of the individual indexed wage and city average pay, multiplied by number of qualifying years. People are allowed to pay more before retirement to entitle them to a larger pension. However, the payment must not exceed 15 percent of the base payment.

Rates are different throughout the country. The minimum pension is 40 to 60 percent of the local average provincial wage during the previous year.

Basic pension insurance allows for the average local wage in the year before retirement and the average individual monthly wage used to calculate contributions. The monthly benefit is the balance in the insured's individual account divided by the actuarial month. The actuarial month is determined by the insured's retirement age, the average life expectancy for the urban population, and the interest rate. Transitional arrangements are provided by local governments for workers who began employment before the introduction of mandatory individual accounts in 1997 and who retired on or after January 1, 2006. After the monthly benefits from the mandatory individual account are exhausted, benefits are paid from a local pooling fund.

Early pension is calculated based on the average provincial wage in the previous year, the average individual monthly wage used to calculate contributions, and the number of years of contributions.

Lump-sum settlements can also be applied for. This would be a lump sum of the balance of the insured's total contributions plus interest.

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