Research On The Development Of Balancing The Rural And Urban Pension Scheme In China

In initial industrialisation, a dual system with an urban-rural distinction had been eastabishedto encourage the subsidization and development of industry by agriculture in china. In2005, theindustrialisation in china has entered the middle stage in general; the relation between industry andagriculture has tranformed from the industry priority development to balance the industry andagriculture development. The urban and rural pension scheme which is one of the importantcontents of balancing the urban and rural must adapt itself to the industry-agriculture relationtransformation, corresponding with the economy and social development.Taking the urban-rural relationship and pension reform theory as guiding theory, Based on theurban-rural gap and regional disparities, this dissertation has discussed the strategy of balancing theurban and rural pension delevelopment, measured the adequacy level of pension benefit forurban-rural residents uncovered by pension scheme, analyzed the feasibility of the pension schemefor the land-expropriated peasant inclusion with basic pension scheme for urban workers and thevoluntary pension scheme for urban-rural residents, proposed the policy of the pension scheme forrural-urban migrants in accordance with the characteristics of rural-urban migrants. Thisdissertation has made a research on how to improve the portability of pension between differentkinds of pension schemes and between different pooling units. Furthermore, this dissertaionsuggests that the urban and rural unified and multilevel pension framework consists of five pillars.The main contents and innovations are as follows:(1) Balancing the urban and rural pension development is to set up a unified and multilevelpension schemes, but due to urban-rural gap and regional disparities in economic developmentacross China, There is a lack of the favorable conditions for developing the unified nationalpension systems covering urban and rural population in one step. Thus the aim to estabilish theunified and multilevle pension system will be accomplished in line with the three-step development.The first step is to establish the pension scheme for the rural and urban uninsured populationproviding widespread coverage to the urban and rural population. The second step is to achieve theintegration of the different pension schemes, which will lay a solid foundation for the unifiednational pension systems. The last step is to set up a unified and multi-pillar pension system.(2) The second step is the key stage of the balancing the urban and rural pensiondevelopment. In this development stage, balancing the urban and rural pension development is tointegrate different pension schemes. The first task of integration is to provide adequacy pensionbenefit at least to meet basic needs for rural-urban residents. The second task of integration is todesign a policy to incuse various existing pension schemes for special group in various regions with the pension scheme for urban workers or voluntary pension scheme for rural-urban residents,so as to remove unreasonable differences and accomplish the transformation of pension systemfrom Hukou-based social insurance programs to employment-based social insurance programs.Furthermore, the third task of integration of pension schemes is to design a way to transfer accruedbenefit when residents mobile between three kinds of pension schemes mentioned above or poolingunits.(3) It is concluded that the ratio of the urban or rural residents’ basic consumption expenditurewhich was estimated by the extended liner expenditure model to urban or rural average disposal(net) income is30per cent. According to the estimated basic consumption expenditure, thedesigned payment level is set at30per cent of urban or rural average disposal (net) income. Thetarget replacement rate from the individual account and universal pension is20.0per cent and10.0per cent. In order to accomplish the goal of integration of pension benefit, individual account isfinanced with contributions of8per cent from individual and2per cent of from governmentsubsidy. Individual has the ability to pay for the premium according the surplus of disposal (net)income diminishing consumption expenditure. Total government subsidy to individual account anduniversal pension reaches less than4per cent of government revenue through conducting a specificstudy on the quantitative analysis and projection on the government input into the pension schemefor urban-rural residents.(4) It is concluded that the pension scheme for land-expropriated peasants integrates withvoluntary pension scheme for rural-urban residents is fiscally and administratively feasible, butintegration with the pension for urban workers is not fiscally feasible in developing regions throughthe estimation of costs of the integration respectively. Thus, it is preferred policy for the pensionscheme for land-expropriated peasants to integrate with the pension scheme for rural and urbanresidents.(5) It is difficult to meet rural-urban migrants for old age security by the simplistic approachof extending the pension for urban workers to them, due to rural-urban migrants with thesocioeconomic characteristics of high mobility, unstable jobs, low income and strong heterogeneity.It is recommend that current pension schemes that cover rural-urban migrants will be integrated bythe pension scheme for urban works or by the pension scheme for urban-rural residents. As far asthe enterprise contribution capacity concerned, according the rural-urban migrants wages, thepension scheme for rural-urban migrants earning less than60per cent of the average wageintegrates with the pension scheme for urban and rural residents. If rural-urban migrants join theresidents’ pension scheme, individual account retains but government subsidy to individual accoutsis implemented as notional accounts rather than fully-funded accounts. Of course, they can join thepension scheme for urban works voluntarily, negotiating with enterprise.(6) Basic pension institution framework consists of three kinds of pension scheme for civil servant, urban workers, and urban and rural residents after integration. There must be someportability arrangements to tackle the transition problem of different schemes. It is proposed thatcontribution periods paid completed successively or alternately under the respective pensionscheme shall be accumulated to determine the qualification for benefits. After totalization, if theright to receive benefits from one or both Systems is established, then the benefit shall be paid inaccordance with the following guidelines: labour mobility between the polling units, it is preferredway to employ the vesting formula of the final retirement polling unit corresponding. But when thelabour social mobility between different status such as civil servant, workers and residents, it ispreferred way to employ the vesting of the scheme who has left. As last the agency who residespays the pension benefit.(7) It is propsed that a unified and multilevel pension system has five pillars. The zero pillar isthe guaranteed income supplement scheme, which provides income to the elderly who live underthe minimum standarding of living if only depending on the first pillar. The first pillar is a nationalbasic old age insurance covering the population, which is mandatory contributions to anearings-related, pay-as-you go and defined benefit scheme. The second pillar is a mandatory fullyfunded defined-contribution individual account scheme, which would be a valuable complement tothe first pillar pension. The third pillar is a tax-advantaged voluntary scheme organized at either theoccupational or the personal level, which is to enable and encourage individuals and enterprises tosave for more generous benefits. The fourth pillar is famliy support, which proves non-monetaryservcies such as housing, access to health care, etc.