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October 20, 2010

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Pressure grows on Shanghai pensions

SHANGHAI is paying an increasingly heavy price to support the city's elderly with fewer than two people contributing to the social fund for every senior citizen who benefits.

The Shanghai Human Resources and Social Security Bureau revealed yesterday that for every one person claiming a pension, only 1.41 people were contributing to the city's social insurance fund last year. In 1993 the figure was 2.82.

A healthy situation would be for three people to be contributing for each elderly person, said Wang Daben, a professor on population with East China Normal University. "Shanghai's pension fund is under great pressure now," he said.

The problem is less serious in other parts of the country, with the latest White Book of China's Human Resources saying that by 2035 two taxpayers will have to support one pension-drawer across the whole country.

To alleviate the growing pressure on the city's pension pool given the rapid growth of Shanghai's aged population, the city this month began a trial of delaying retirement.

In the trial, local residents, but not government employees, can apply to draw their pension later than retirement age if they want to continue in their job and their companies agree to keep them on and continue to pay social insurance.

But Wang did not believe the practice would help the city's pension fund. "The trial is only limited to a small group, plus the delay is based on both sides' agreement," he said.

He thought the initiative was mainly to allow top professionals to continue to serve society and their companies after retirement age.

"People with higher education degrees will work for fewer years than those without if we stick to the retirement age," Bao Danru, vice director of Shanghai's human resources bureau, said earlier this year. That's because men and women who spend extra years in school enter the workforce later than less-educated workers, giving them fewer years of employment if everyone retires at the same age.

In China, the retirement age, which was fixed about 50 years ago, is 60 for men and 55 or 50 for women, depending on the job.

The trial in the city allows men to retire as late as 65, while the age for women is 60.

At present, the government subsidizes the city's pension fund which is already in deficit, Wang said, and he suggested that part of the profits made by state-owned corporations could go toward pensions.

"Or we could just delay the time for people to retire nationwide just as some European countries do," said Wang.

In 2008, the city injected up to 18 billion yuan (US$2.71 billion) into the pension fund. Last year the figure was between 23 billion and 25 billion yuan.


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