China’s New Rural and Urban Pension Schemes

 According to the World Bank, in 2016 persons over the age of 65 years make up approximately 10 per cent of the population in China. In 2009, the State Council of China introduced the New Rural Pension Scheme (NRPS) to provide basic income support for older persons in rural areas. Local offices of the Ministry of Human Resources and Social Security supervise the fund for individual pension accounts.

All rural residents over 16 years of age are eligible to participate in the NRPS, which is made up of a combination of contributions from the central Government and voluntary contributions. Under the scheme, flat rate pensions start at RMB 55 ($9, 2009 exchange rate) per month. As participation among rural workers is voluntary, a ‘family binding’ element was introduced where older persons can benefit from the basic pension only if their children are contributing toward the rural pension scheme. Those who had not reached the age of 60 by the time the scheme was introduced can receive the pension benefits only if they contributed for 15 years or if they made up for any shortfall. There were 240 million people enrolled in the NRPS in 2011 in addition to the 90 million people already receiving pensions. Further, in 2011, the Urban Residents Pension Scheme (URPS) was introduced with the aim of broadening minimum basic income protection to all older persons living in urban areas. Over 260 million urban workers benefitted from the URPS in 2012.  Prior to 2009, only two schemes provided older persons with income security in China, namely the urban enterprise workers and civil servants schemes. Consequently, in 2004, 46 per cent of urban employees were covered and only 11 per cent of rural workers. With the introduction of NRPS and URPS, by 2013 about 75 per cent of the population was covered under the four pension schemes, of which 59 per cent was covered under the new schemes. In 2014, the Government announced that the NRPS and URPS would be integrated into one system.

Anchored in the 2010 Social Insurance Law, China’s pension system has undergone major structural changes in the past two decades, moving from a system based on social insurance principles to a system whereby the central government is partly responsible for funding. While China’s commitment to provide coverage for rural-to-urban migrant workers has achieved great success, the scheme has confronted challenges in monitoring the development of the rural pension system. Nevertheless, China has made significant strides to achieve universal coverage of pensions and the new rural scheme has been recognized as an important part of the national social security system that will contribute to reducing disparities between rural and urban areas.

 

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