China will reconfigure the national pension fund this year in order to narrow the disparity between provinces and regions and improve the equity of the national pension system.

On Dec 16, Vice-Premier Han Zheng stressed at a teleconference that introducing a State-level system for the national pension fund was an important central government decision, which will benefit the people and social stability.

He added that it's also necessary to enhance national management of the pension fund to secure its smooth allocation and thus guarantee the sustainability and equity of the existing endowment.

The idea was first suggested by the State Council in 1987 during regulations to define labor contracts in State-owned companies. The Ministry of Social Security and Human Resources then proposed establishing a national management system for the pension fund in its 12th and 13th Five-Year Plans for the national social security sector. It was also highlighted in the ministry's 14th Five-Year Plan (2021-25), which was released in late June, 2020.

Between 2018 and 2020, the ministry helped provinces and regions establish provincial-level pension fund systems to aid the transition to a national system.

Implementing the policy will relieve possible financial gaps in payments while narrowing the economic imbalance between different districts and provinces.

The Ministry of Social Security and Human Resources said that during the 14th Five-Year Plan, over 40 million people are expected to retire and the working population will decrease by 35 million.

According to the ministry, the national pension insurance campaign covered about 1 billion people by March last year. However, a report by the Chinese Academy of Social Sciences in 2019 said that the country will soon face a financial gap of 3.8 billion yuan ($597.8 million) in the pension fund as a result of its aging population, a figure that could rise to as much as 11.3 billion yuan by 2050.

Additionally, there are disparities in pension funds among provinces and regions due to differing economic conditions. For example, some eastern provinces showing good economic performance have a surplus in pension funds, while western and northwestern areas with larger elderly population but less developed economies, can't cover pension payments.

To balance this disparity, the central government set up a pool in 2018, which collects 3.5 percent to 4 percent from each province's pension fund. According to the Ministry of Finance, it currently holds nearly 930 billion yuan to help ease payment shortfalls in central and western provinces.

Zheng Bingwen, director of the world Social Security research center at the Chinese Academy of Labour and Social Security, said in a recent interview with news portal Jiemian, that the period of the 14th Five-Year Plan is important to the establishment of a national pension fund management system.

"It may take quite a long time to establish a nationwide system," he said, adding that at least it can be achieved in one go.