Research On Financial Sustainability Of The Basic Pension Insurance For Urban Enterprises Workers In China

With the acceleration of the aging of China’s population,as well as the gradual maturity of the pension insurance system for urban enterprise workers,the number of retired workers continues to rise,and the pressure of pension expenditure increases,making the issue of fiscal sustainability increasingly prominent.According to statistical data,in 2014,the pension income has been unable to meet the pension expenditure,fiscal subsidies continue to increase,and some provinces have run out of accumulated pension funds.However,the peak of population aging in China has not yet arrived,the pressure of pension expenditure will further increase in the future,and the problem of fiscal sustainability will be more serious.In order to improve the solvency of the pension fund,the government has introduced related policies,such as transferring part of state-owned capital to strengthen the social security fund,establishing a central regulation system to alleviate the imbalance between the income and expenditure of the pension fund in regions,and reforming the collection system to improve the collection rate.However,in order to reduce the burden of enterprises’ pension payment,the government has introduced a plan to reduce the payment base and rate of pension.But,the introduction of the scheme has aroused concerns about the sustainability of the pension fund.Apart from population aging,are there any other factors causing the financial sustainability of endowment insurance?Will the introduction of the plan to reduce the premium increase the pressure of pension expenditure?Can the reform of the collection system alleviate the adverse impact of reduced premium on pension income?How to deal with the financial sustainability of pensions in the future?Firstly this paper introduces the history of pension system reform,analyzes the participation rate and the financial operation of the pension fund,and then concludes the reasons for the increase of pension expenditure and the loss of pension income in the system.The results show that the cost of the system transition and the system parameters are not adjusted with the changes of population and economic development,which makes the pension expenditure continue to expand.And the low actual contribution base,the low actual contribution rate and the low participation rate are the main reasons for the loss of pension fund income。Based on the actuarial model of the International Labor Organization,this paper establishes the actuarial model and the actuarial hypothesis of pension according to the pension policy of China.The Cobb-Douglas production function is used to predict the GDP and the average wage growth rate.Firstly,this paper forecasts the financial operation of pension from 2021 to 2050 under the current system,and evaluates the financial sustainability of pension.The results show that the reduction of contribution base and contribution rate leads to a sharp decline in pension income,and the current balance deficit will appear around 2024,3-5 years earlier than that under the original contribution policy,and the accumulated balance will be exhausted around 2032,4-6 years earlier than that under the original contribution policy.If nothing is done,the cumulative deficit will be between 55 and 80 percent of GDP by 2050.After the reform of the collection system,tax authorities will help to improve the insurance rate of employees.If the coverage rate rises to 80%within five years,the pension will run a current deficit in 2028-2030 and the cumulative balance will run out in 2036-2040.If no other measures are taken,the cumulative deficit as a share of GDP will be reduced by about 11.5%by 2050.According to the above empirical analysis,due to the implementation of insurance premium reduction and collection system reform,the problem of pension fund income loss caused by low contribution base,low actual contribution rate and low insurance participation rate has been solved.But in any case,pensions will not be financially sustainable until around 2038.Based on the above forecast results,design the solution plan.First,by gradually raising the retirement age for women workers by 2025,The current pension deficit will be delayed by 1-2 years.If the retirement age for all workers is gradually raised in 2035,the pension expenditure will drop significantly and the accumulated deficit of the fund will be delayed by 6-10 years.Pension expenditure as a share of GDP would fall by 4 percent,and the cumulative deficit as a share of GDP would fall by 50 percent.In the case of optimistic population and economic development,the implementation of the delayed retirement policy can ensure the stable operation of the pension system,but the cumulative balance at the end of the forecast period shows an accelerated decline trend.Therefore,delaying retirement policy does not guarantee that the pension system is financially sustainable.Then this paper introduces average life expectancy into pension adjustment mechanism.The initial pension is linked to the average life expectancy,and the subsequent pension is linked to wages and prices.The results show that the time delay of the current balance deficit is 2-7 years,and the time delay of the accumulated balance deficit is 3-7 years.Pension expenditure as a share of GDP would fall by 3-5 percent,and the cumulative deficit as a share of GDP would fall by 20-45 percent.Even so,the implementation of the pension adjustment mechanism cannot guarantee the financial sustainability of the pension system.If delayed retirement and pension adjustment are implemented together,pension expenditure as a share of GDP will fall by an average of 5-8%by 2050.To sum up,this paper uses multiple actuarial assumptions and actuarial models to conduct an empirical analysis to evaluate the future financial sustainability of pensions under the current system.In order to solve the problems existing in the system parameters,the paper designs the delayed retirement scheme and pension adjustment mechanism,and predicts the future fiscal sustainability of pension.Among them,it is a new exploration to introduce average life expectancy into pension adjustment mechanism.It is hoped that the research of this paper can be helpful to promote the reform of pension system.