In the wake of the promulgation of the pension fund central adjustment system, Vice-Minister of Human Resources and Social Security You Jun has given a detailed introduction and interpretation to the new policy at a policy briefing on June 13.
In 2017, the national pension insurance fund received 3.3 trillion yuan ($523 billion), spent 2.9 trillion yuan, and had a surplus accumulated over the years of 4.1 trillion yuan, according to the Ministry of Human Resources and Social Security.
In general, pensions were paid on time and in full, but provincial regions saw increasing disparity in their insurance funds due to differences in economic growth and ratios of workers to retirees, according to You.
Surpluses are mainly concentrated in eastern regions, such as Beijing and Guangdong province, but other places, such as Liaoning and Heilongjiang provinces, have pension fund deficits, You said.
Therefore, an adjustment mechanism at the central level was called for to balance pension allocation nationwide.
The central adjustment system will neither add burdens to enterprises and individuals, nor increase the proportion of individuals’ payments or affect the treatment of retirees, the vice-minister said.
The central adjustment fund is constituted by drawing a certain proportion (at least 3 percent) of capital from basic provincial pension funds.
The cardinal number of capital that each province turns in is calculated by taking 90 percent of the average salary of enterprise employees and multiplying it by the number of required contributors.
Then the central fund will be distributed to provinces within the same year according to the province’s number of retirees.
Because average salaries can reflect economic levels, they are adopted as the cardinal number of capital submitted by each province. The average salary is the weighted average of employees from both private and public enterprises as well as individual participants of social security insurance to approximate real income levels.
Given that human resources migration adds difficulty to counting social security insurance participants, some people are counted as social security participants in a province, but pay insurance in another province, so the number of required contributors to central pension fund is calculated by the average number of employees and social security participants.
The allocated fund per capita is the sum of the central pension fund divided by the number of retirees nationwide.
Therefore, some provinces with higher ratios of workers to retirees may contribute more than the adjustment fund they receive, while provinces with lower ratios will receive more than what they have turned in, thus improving the country’s overall ability in pension risk management.
Central pension funds are collected and paid independently and used exclusively on pensions, so security will be ensured.
At first, pensions were managed at the county level, and then coordination was shifted to the provincial level. However, with laborers flowing from western to eastern areas and accelerated aging of the population, the gap between different provinces’ ratios of workers to retirees has become larger. Therefore, a central adjustment system was demanded as a transition to achieving the ultimate goal — establishing a nationwide standard for pension collection and allocation, You explained.
To stimulate provincial governments’ efforts in collecting pension funds, the capital turned over to the central government depends on local income levels and number of pension participants, instead of the actual funds collected.
And local governments’ work will be assessed in accordance with their collection and management of pension funds, You added.
However, the current pension subsidy policy from the central government will remain the same or even better. Last year, it provided over 440 billion yuan in subsidies and will continue supporting local governments in pension distributions.
