China is expected to set up a central adjustment system for enterprise employees’ pension funds starting July 1, according to a circular issued by the State Council.

Owing to the unbalanced regional economy and the old-age dependency ratio, the scale of pension fund pools and payment pressures for basic pensions vary in different provinces and regions. The adjustment mechanism at the central level is expected to enable sustainability of the basic pension system nationwide.

At present, the pension fund for enterprise employees is managed at the provincial level. After establishing the central adjustment system, the fund can be balanced among different provinces to guarantee timely and sufficient allocation.

The central adjustment fund is constituted through drawing a certain proportion (at least 3 percent) of capital from provincial basic pension funds.

The cardinal number of capital turned in is calculated by multiplying 90 percent of each province’s average salary of enterprise employees by the number of should-be contributors.

The central fund raised will be distributed to provinces within the same year according to the province’s number of retirees, as confirmed by the Ministry of Human Resources and Social Security and the Ministry of Finance.

Collection and payment of the central pension fund are managed independently, and should not be used in other ways, such as balancing the budget.

However, the current pension subsidy policy from the central government will remain the same. If a province still has a deficiency after being granted financial subsidies and central adjustment, local governments should take responsibility to cover the deficit.

A mechanism will be established to divide shortage responsibility among local governments at different levels.

The implementation of the pension fund central adjustment system will be included into the assessment of provincial governments’ work.

Information construction is also demanded, such as building a searching platform to check individual pension payments and their remuneration, a monitor system for central pension fund adjustments and a central database shared nationwide.

The Ministry of Human Resources and Social Security and the Ministry of Finance are in charge of formulating a timetable and road map for implementation of the pension fund central adjustment system, as well as guidance and supervision.