The Evaluation Of China's New Pension Policy

A recent policy change in China's pension system was released in Dec. 2005, which called for an adjusted benefit formula and incorporated an inflation-adjusted factor. This paper initiates to analyze and evaluate these new policy changes from both social adequacy and individual equity perspectives, with special focus on the latter through a"money's-worth"analysis and prediction.Under a set of reasonable assumptions, a model was developed to predict the cash retirement benefits for various cases of workers at three earnings levels, who will attain retirement age in the future using three different measures, namely"benefit/tax ratio","lifetime transfer"and"internal rate of return".Through data analysis, it shows that China's pension system is still at an early stage of development, with relatively generous benefit provided. Within this system, most of the retired workers can expect a reasonable rate of return.