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March 04, 2021

China: Later retirement age debate raised for the first time since 2012

China: Later retirement age debate raised for the first time since 2012

Amid reports that national funds are depleting, China’s National People’s Congress and People’s Political Consultative Conference are set to debate a proposal for Chinese workers aged 50–60+ to work beyond the current retirement age of 60. According to a draft of the 14th Five-year Plan which details the economic and social development objectives for the next five years, the increase in retirement age must be implemented. The options at the moment include increasing the retirement age for male workers by five years—from 60 to 65—and there are plans for the age difference between male and female workers to be aligned during a buffer period.

Liu Wei, director of the National Council for Social Security Fund, supports the proposal. He notes that the current retirement age of 60 was implemented in 1951 when Communist China was still in poverty and the average life expectancy was less than 50 years. According to statistics from 2019, life expectancy in 2019 was 77, Wei said. IZA World of Labor author Marek Góra also believes that pension systems need to be redesigned to accommodate demographic changes. In his article, he writes that:

“Increasing the retirement age is the most promising method to improve the sustainability of pension systems. In effect, it combines raising contributions and lowering benefits. Workers who work longer contribute more to the system and take out less, since they will be receiving the benefits for a shorter period. Increasing the pension age is less burdensome to most people than either of its two components since it does not raise flows of monthly payments or reduce flows of monthly benefits.”

Nevertheless, Li Jia, a research specialist with the Pangoal Institution, a Beijing-based semi-official think tank, has highlighted that China is not only facing the problem of an aging population but sliding fertility rates as well. Liu’s answer to this problem lies in the policy recommendations he submitted in the report to the NPC’s Social Development Affairs Committee. It notes that the adjustments to the retirement policies should go hand in hand with other plans such as relaxing birth control and encouraging childbearing. Wei also notes that employers and workers must have the autonomy to work out flexible arrangements that work for both parties. Even so, it is still not certain how China’s pension funds would benefit from an increase in the retirement age.

Read Marek Góra’s article Redesigning pension systems.

Find more IZA World of Labor content on aging workforces and pensions reform.