Study Of China's Basic Old-age Insurance System

We have made tremendous achievements during the reform of basic old-age insurance system. We have shifted our old-age insurance model from the outdated model of"self insurance"on the part of enterprises to national old-age insurance system. The new old-age insurance system is established on two pillars——overall social planning and personal accounts, shared by individuals, institutions and government. And the adjustment mechanism for retirees has been established. Population coverage is gradually expanding from towns to rural areas. However, many deficiencies exist in the reform, such as low-level funding, great differences between different regions, the unresolved transition costs, the almost empty personal accounts, the small coverage of old-age insurance, the widening gap of treatment between different groups of retirees, and the establishment problem of basic old-age insurance in rural areas.The main reason for all these existing problems is that the old-age insurance responsibility is not clearly defined and measured, therefore, the hidden liabilities and transition costs cannot be measured precisely, not to mention the effective method of resolving. Some new reform has also increased the long-term cost of the system. Having analyzed the structure of old-age insurance benefits, we propose a method for measuring old-age insurance responsibility, which is based on the concept of life insurance reserve and the method of actuarial science, thereby a consistent criterion can be established to assess the hidden liabilities and long-term cost during the promulgation of old-age insurance system and distinguish between respective responsibilities of governments at all levels. The amount of hidden liabilities is limited during some period, and it will increase with the future economic development and national strength enhancement. However, compared with the amount of national economy, the original amount of liabilities will decline. The key issue is how to reduce the new liabilities. We should do quantitative analysis on each reform as well as the cost increased, design the old-age insurance scientifically, and establish necessary appraisal standards during the reform of old-age insurance system.Old-age insurance reserve is defined as employees'pension payment responsibility that the government is liable for. At a certain time, old-age insurance reserve = actuarial present value of future pension– actuarial present value of past accumulated payments of units and individuals– actuarial present value of future payments of units and individuals. Based on this general method, an example is put forward as well.Personal account is an important pillar in basic old-age insurance. Model for the relationship between the payments for personal account, investment interest, accumulation of years and insurance level reveals how the payment proportion, the fee wage, the annual growth rate of wage, investment interest, accumulation of years and the proportion of personal account withdrawal affect the insurance level. With the introduction of competition of marketization and the increase of investment options of personal account, more choices have been provided for the personal account withdrawal. Increased investment income and accumulation level can lead to improved withdrawal. Reducing the retirement age gap between men and women and gradually postpone retirement age is a necessary policy option.The reform of the old-age insurance system, which costs fund, time and manpower, is related to the state, the collective and individual interests. Therefore, views of all society and various interest subjects should be solicited to ensure the scientificity of the reform.Rural old-age insurance system, which covers the selection of mode, the source of funds, the level of insurance and many other research fields, is the cornerstone of hundreds of millions of peasants'future life and social stability. Due to length limit, this paper just focuses on the specific group of landless peasants, and studies the corresponding mode selection and system improvement.Old-age insurance for landless peasants is a security system farmers obtain at the cost of collective land-use rights. Government should take many social and economic factors into consideration to establish the corresponding pension insurance system. The evaluation of basic living standards of landless peasants, the establishment of mechanisms for adjustment, the potential future costs of policies that government introduced, the current and future financial affordability of government, all the above should be assessed scientifically. Should the system establishment of old-age insurance for landless peasants with the direct government control or the market and professional operation, it is capital security, service convenience, cost saving and landless peasants satisfaction that account. Different ways should be allowed in view of respective history and reality of different regions. All that government should do is to focus on the formulation of standards and regulation. During the business operation of the old-age insurance for landless peasants, if the government only focuses on the management right of huge fund, without scientifically calculating the long-term responsibility corresponding to such funds, the government will be put on a heavy future burden in this field.As a specific group with the amount calculated in 100 million, peasant workers emerged during the course of urbanization and industrialization. The establishment of their future old-age insurance system involves the dual urban-rural economic structure changes and many other institutional factors.The phenomenon that peasant workers'willingness to participate is low and surrender ratio is high is out of the following reasons: firstly, peasants'affordability is weak because of the low income; secondly, the existing system is unreasonable and obstacles exist during the transference; thirdly, peasants'trust for the old-age insurance system is lack. Therefore, during the development of the old-age insurance system for peasant workers, we should think their fundamental interests as starting point, reject all disadvantage factors for them, and absolutely put an end to the practice that lowering the proportion of local residents'payment and enhancing their retirement treatment at the expense of the interests of peasant workers. Regardless of whether peasant workers surrender, their old-age insurance payment records should be kept for the future retirement pension treatment. Especially, as for the ever participants who have surrendered, governments at all levels are obliged to record their unit and individual payment funds and interest, allowing them to re-pay the money that has been refunded with eligibility for the future access to basic\ old-age insurance.A national unified approach for pension calculation and issue should be achieved, including payment ratio, withdrawal ratio as well as the cardinal number of average social wage. Gradually, having distinguished between different responsibilities of different regions, the level of overall planning should be enhanced, processing to national level. Prior to this, as for the personal account, it is recommended that its transference should be based on its recorded balance, that is the amount of nominal account, and a national unified accounting rate should be determined as the compound interest during the calculation.As for the transference of social common fund, before the realization of national overall planning, if the payment to wage level and payment ratio of the region transferred out is higher than the region transformed in, it can be regulated to transfer in accordance with the payment to wage level and payment ratio of the region transferred in. Conversely, if the payment to wage level and payment ratio of the region transferred out is lower than the region transformed in, the social common fund should be fully transferred in.