Complementary steps will make welfare system fairer

By Fu Qiang Source:Global Times Published: 2012-6-29 1:05:05

Following the Ministry of Human Resources and Social Security's proposal to set a flexible retirement age early this month, the government has taken the necessary complementary steps to strengthen the nation's social security system.

The State Council announced a reform outline recently, including the removal of regional discrepancies in social security programs, accelerating reform of social security programs of public institutions, and studying delayed drawing of pension funds.

How to make the social security program fair and sustainable is a formidable challenge for many. It is especially daunting for the Chinese government given the short history of its social security program and rapid growth of its aging population. The system, from its inception, has been implemented differently in urban and rural areas, between government departments and the private sector. Removing these unfair features has become an increasingly urgent task.

In addition, though a huge chunk of the population is on the move, the mobility of the social security program has been lagging. According to data released by the Ministry of Human Resources and Social Security Wednesday, there were only 500,000 cases of cross-region transfer of medicare accounts in 2011 involving 220 million yuan ($34.6 million), but medicare covers 473 million people in urban areas and 46.4 million in rural areas.

The current pension fund system consists of three major sections: the government-sponsored basic pension fund system, supplementary pension fund for enterprises and commercial pension insurance. The reform has a clear tendency of shifting the government-guided pension fund system to one supported by the whole of society. For that end, the reform outline may shift tax deduction policies toward the latter two parts of the pension system.

This policy has been regarded as a great supplementary step to enrich China's pension system and relieve the financial pressure of paying the pensions faced by the government. It is hoped that the pension system can interact positively with the capital market, bringing mutual benefits to both pension funds as well as stock and bond markets. The outline also considers granting extra pension funds to parents of only children, given the fact that the one-child generation is now shouldering the burden of supporting their aging parents.

The Chinese public has growing demands of social security quality, pressuring the government to upgrade a primitive system to a sophisticated one in a short period of time. The State Council's reform outline is an important step forward.

 



Posted in: Observer

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