Trial approach for home-for-pension policy
Published: Sep 26, 2013 06:43 PM
Illustration: Lu Ting/GT

Illustration: Lu Ting/GT

A new reverse mortgaging policy has drawn heated debate among experts and the public after the central government announced a trial scheme.

The State Council, China's cabinet, published a proposal on September 13 introducing the scheme for senior citizens to supplement their pensions. Under the home-for-pension plan, residents over 60 can use their homes as collateral in return for a fixed sum every month, or to pay for care at a nursing home.

The central government encouraged local governments to launch pilot schemes as early as 2014.

The Ministry of Civil Affairs explained the reverse mortgage policy was a diversified solution to tackle the problem of China's ever-increasing elderly population.

On the Internet, the public are divided over the scheme; many criticize the government for leaving the issue of elder care to individuals because they are unable to solve the problem themselves.

Last week Shanghai's municipal statistics bureau interviewed 2,248 senior citizens in their 60s and 70s across the city. Over 70 percent of those surveyed expressed support for the new policy, the Global Times reported.

Shanghai residents may be more open to the new policy because of the city's long history with an aging population. According to international standards, an aging society is an area where over 7 percent of the population is 65 years or older. Shanghai reached this milestone as early as 1979, a full two decades before the country as a whole did in 1999. Even without the central government's policies, the Shanghai government and the city's residents have to find ways to solve the problem.

While other developing countries are still benefiting from young populations, China - and Shanghai in particular - has to address its growing gray-haired demographic. We can assume that Shanghainese are more open to the scheme since the problem here is more serious than elsewhere in the country.

The average life expectancy of Shanghai residents reached 82.4 years in 2012, Mayor Yang Xiong announced in a government report during the city's two sessions. Undoubtedly, Shanghai residents enjoy a longer life span with the support of economic development, healthier lifestyles and diet and also a better medical care system. But at the same time, Shanghai suffers most in dealing with the aging issue.

Another reason Shanghai residents welcome the policy is that the majority of the city's senior citizens possess property.

While I am not familiar with the property ownership situation of people in other provinces or regions, I still believe the policy shouldn't be implemented nationwide. Just like the free trade zone, pilot schemes should be introduced step by step. As top-tier cities, Shanghai and Beijing can be pioneering areas to initiate reforms. At the same time, second-tier cities like Hangzhou and Wuhan can try other reforms. Third-tier cities in underdeveloped regions have to introduce different policies specific to local conditions to keep pace with their counterparts.

It would be ideal to promote a policy benefitting old people across the nation. But since China is such a big country with very particular regional features, it's sometimes irresponsible to introduce a standard for the whole nation.

For the remortgaging policy to be smoothly introduced and implemented, the authorities have to first of all study how many people over 65 own property in a certain area. Second, among those people, the authorities should learn how many of them are willing to remortgage their property for an extra pension. Then they can have a detailed policy to address the needs of the targeted group.

An incremental approach is wise. First of all, some representative trial cities should be carefully selected. Practical regulations have to be introduced, and most importantly, the regulations must be subject to revision and adjustment. Authorities should be open-minded. They should realize the complexity of the issue and prepare for changes in the process to address the needs of the public.

Only when a trial has proved successful on a small scale can the policy be promoted for the whole country.

It is worth noting that the policy only targets old people who own property. There is another group of those without property who need more care and attention from all sectors of society.

Everybody gets old. We all hope that a sound policy and system can guarantee a comfortable life when we are unable to take care of ourselves. Both the nation and its citizens need to learn from the experience of other countries to guarantee better post-retirement support.

The author is the managing editor of Global Times Metro Shanghai.