The Security Level And Actuarial Balance Of China’s Basic Pension System

Both in the world level and in China,the degree of population aging is increasing rapidly,so as an important policy to deal with the aging population,the research on the security level and actuarial balance of pension system has become a worldwide topic.The Fourth Plenary Session of the 19th Central Committee of the Communist Party of China also proposed that we should "improve the basic pension insurance system of urban and rural planning and sustainable development,and steadily improve security level." Both the Third Plenary Session and the Fifth Plenary Session of the 18th CPC Central Committee proposed that "adhering to actuarial balance" should be taken as an important means to improve the pension insurance system.With economic growth slowing down,the life expectancy of the population is increasing,but the retirement age has not been delayed correspondingly,it has become the focus of our country to ensure that the level of old-age security of the elderly does not decrease,and maintain the normal operation and actuarial balance of the old-age insurance fund to deal with the increasingly serious problem of aging.This paper mainly measures China’s pension security degree and sustainability of pension insurance system from three perspectives:the security level of pension insurance,the actuarial balance from the micro perspective and the actuarial balance from the macro perspective.Firstly,in terms of analyzing the security level of pension insurance,this paper uses 6 CHIPs micro data of China Income Distribution Research Institute from 1988 to 2018,and measures the security level in China in recent 30 years based on multiple indicators such as "empirical" pension replacement rate and pension relative level.This paper also introduces various definitions such as income replacement rate and income relative level,net replacement rate and total replacement rate to measure and analyze the pension security level of urban workers in China from 1988 to 2018.Pension replacement rate refers to the ratio of pension to employee’s wage,and the relative level of pension refers to the ratio of pension to social average wage,which is often used to measure the security level of pension system.Income replacement rate refers to the ratio of retirement income to employee income,income relative level refers to the ratio of retirement income to social average income,which can be used to measure the income security level of employees after retirement.The research results show that in the past 30 years,the pension replacement rate of urban workers in China has gradually declined.Based on full range wage,the average pension replacement rate has dropped from 89.19%in 1988 to 55.05%in 2018,which is lower than the target replacement rate of 59.2%.The average replacement rate of income decreased from 90.03%in 1988 to 55.86%in 2018.Compared with the empirical research of other countries,China’s pension replacement rate and the income replacement rate are relatively low.Therefore,it is necessary to vigorously develop multi-level and multi pillar old-age security system,such as enterprise annuity,occupational annuity and personal savings plan,to ensure the elderly life of enterprise employees.Secondly,when analyzing the actuarial balance of China’s pension system from a micro perspective,we also use the CHIP data of China Income Distribution Research Institute in 2018 to estimate the individual’s wage income over the years based on the wage income function and the basic characteristics of the individual,and calculate the individual’s lifetime wage income,lifetime pension insurance payment and lifetime pension benefit according to the actuarial balance model of pension.Then this paper will calculate the net benefit of individual lifetime pension,so as to evaluate the actuarial balance degree of individual participation in the pension system.The calculation results in this section show that almost all intergenerational groups and all groups have obtained net pension benefit higher than actuarial balance,in other words,the lifetime net benefit of pension is greater than zero,which encourages individuals to actively participate in the pension insurance system.In general,the lifetime net benefit of enterprise employees’ pension is 492191 yuan,the basic account and personal account are 260191 yuan and 232000 yuan respectively;the lifetime net benefit of newly reformed organs and institutions’ pension is 791047 yuan,the basic account and personal account are 252519 yuan and 538528 yuan respectively.The higher net benefit of personal account pension is due to the compensation of transitional pension account.The basic accounts of enterprise employees and the newly reformed governmental pension insurance system have played a significant role in income redistribution from high-income groups to low-income groups.The lifetime net benefit of pension decreased from 371701 yuan and 453338 yuan in the lowest income group to-11769 yuan and-26506 yuan in the highest income group.From the perspective of the total account,the net benefit of enterprise employees’ the lowest income group and the highest income group is 583709 yuan and 252285 yuan respectively,and the net benefit of governmental pension system the lowest income group and the highest income group is 846510 yuan and 703547 yuan respectively.The lifetime pension net benefit of urban and rural residents is 54536 yuan,including 35450 yuan for basic account and 19086 yuan for personal account,which is significantly lower than the lifetime net benefit of employee pension.Eventually,when we calculate the actuarial balance of China’s pension insurance fund from a macro perspective,we first predict the population structure of China’s urban areas based on PADIS-INT software,and then predict the revenue and expenditure of China’s pension insurance fund in the next 80 years from 2020 to 2100 based on the income and expenditure model of pension insurance fund,and evaluate the financial burden and sustainability of China’s pension system.In the calculation period,there is a deficit of 2470.2 billion yuan in the annual account in 2035,and the cumulative deficit begins to appear in 2045,and the deficit gradually increases,from 15054.5 billion yuan in 2045 to 48966237 billion yuan in 2100.And this paper analyses the sensitivity of the parameters such as the growth rate of pension and wage,the interest rate of individual account and the rate of individual payment.The results show that delaying the retirement age,appropriately lowering the individual account interest rate,and establishing an automatic balance mechanism of pension can alleviate the pressure on the revenue and expenditure of China’s pension insurance system to a certain extent,delay the time of the deficit of the pension fund,and reduce the scale of the deficit of the pension fund.This paper has the several following contributions:firstly,based on the"empirical" pension replacement rate and relative level,income replacement rate and relative level,and using the micro CHIP data from 1988 to 2018,this paper measures the actual level of China’s pension security,which can better reflect the historical trend of China’s pension security level and provide a reference for the reform of the basic pension system;secondly,from the micro perspective of pension actuarial balance,this paper measures the individual lifetime pension income and the lifetime pension insurance payment to get the individual’s lifetime pension net benefit.And we can better evaluate the actuarial degree and intrinsic motivation of participating in the pension insurance system.Finally,from a macro perspective,according to PADIS-INT software to predict China’s urban population structure,this paper will measure the revenue and expenditure of the pension insurance fund in 2020-2100.And based on the sensitivity analysis of different parameter settings,this paper can also comprehensively evaluate and analyze the financial burden and sustainability of the pension system.