A strategic rethink on pension reforms in China

Abstract

China's population is ageing quickly, and its current pension system is facing many significant challenges and institutional drawbacks caused by the failure of the system to clearly define government, corporate and individual responsibilities. At the core of China's pension reform is the three-pillar design with Chinese characteristics: basic public pension based on the social pooling account (pillar 1); the occupational pension system consisting of financing deficit in the individual account by transferred state-owned assets, enterprise annuities and occupational annuities (pillar 2); and voluntarily contributed pension plans based on personal choice (pillar 3), supported by tax concessions. The government has overall responsibility for system establishment, service management and funding of Pillar I, and plays a regulatory role in system establishment and operation of the 2nd and 3rd pillar.