The Chinese government has published new, detailed standards on occupational pensions for public sector employees.

It’s part of an overall restructuring of China’s welfare systems, and is being touted as a major step in reforming the two-tier pension system — the basic pension and the occupational pension.

The State Council says government departments will now be required to pay 8 percent of their total wage bills into occupational pension schemes.

All public sector employees, meanwhile, will have to contribute 4 percent of their taxable salary.

A senior official at the Ministry of Human Resources and Social Security explained the changes.

“The individual’s taxable salary is based on the basic salary from the year before, some relevant subsidies, and any year-end bonuses. So the taxable salary used to calculate pension contributions falls somewhere between the basic salary and total salary,” said Jin Weigang, director of Institute of Social Security.

“A department’s total wage bill is the sum of the payments to its employees who are participants in the public sector pension system.”

Reforms to the basic pension system were announced earlier this year.

They stipulate that government departments must also contribute 20 percent of their total wage bill, while employees pay 8 percent.

“A government department will now have to contribute 28 percent altogether as a result of these two regulations. So the pressure is fairly considerable,” said Jin.

Once public sector workers retire, they can choose to either withdraw the occupational pension and use it to make a one-time purchase of commercial pension products, or, they can draw it on a monthly basis, at a rate set when they retire.

“Individuals are allowed some space to choose. When they retire, they can use their occupational pension to buy a commercial pension. So now, along with their savings, there may be enough for a particular product. But individuals may also need to put some more in should they decide to purchase better pension products,” Jin weigang said.

The new regulations also say those who wish to relocate to other countries and regions can ask to receive their occupational pension in full. And the occupational pension can be passed to descendant, if individuals die during their term of employment.