Merging is first step of pension system reform

Merging pension systems is only the first step in making a more fair system for farmers. There is more to do to realize a modern and fair pension system in China, says an article of the Southern Metropolis Daily. Excerpts:

The State Council decided last week to merge the pension insurance systems for farmers and urban residents and build a basic national pension system for all citizens.

There are several kinds of pension systems in China for civil servants, public institutions’ staff, urban workers, urban residents and farmers. Merging the pension programs for urban residents and farmers are still leaves a big pension level gap for different groups of people.

The basic pension, which is used to pay for citizens’ basic life needs, varies from place to place, because its amount is largely decided by local government finance, not the varying prices in different places.

China’s fiscal revenue hit 11.7 trillion yuan ($1.92 trillion) last year. The government has the ability to adjust the basic pension to local price levels to ensure the quality of life for its receivers.

The central government needs to subsidize the poor governments to improve local basic pension levels.

It is impractical to merge all the pension systems together.

The government has the obligation to provide a basic pension for all citizens. The people should be encouraged to buy more commercial pension insurance funds to enjoy a higher pension, instead of only relying on the government.