The Comprehensive Reform Of The Pension System In China

In 1997, China had built up a new pension system which consists of common account and individual account, after the 10-years-operation, it has achieved perfect performance, but meanwhile it also is faced with severe challenges and dilemmas. Theoretically, the transition to the funded account is inevitable to face huge transition cost. But from the establishment of the new system, the government has never introduced clear policy to cover the huge cost. This directly lead to the individual account fund being overdrafted, now the amount of empty account has reached 900 billion. In addition, there are other more problems in the existing system, for example: the lack of the incentive to participation, the high payment rate, serious arrears and evasion, the dilemma in the course of replenishing the individual account and so on. The interaction of these problems makes the operation of the pension system fall in a vicious cycle. In all of these problems, undoubtedly the lack of the incentive and the cover of the transition cost are the most key points.This paper intends to introduce a whole new perspective–NDC to analyze: in order to make the operation of pension system get into a virtuous circle, at the present social and economic conditions of our country, what kind of pension financial model is supposed to be adopted, how to raise the incentive and cope with the transition cost. Based on the home and abroad research results, by introducing NDC and comparative study on its operation in the other countries, this paper will combine qualitative and quantitative analysis to discuss its applicability and feasibility in China, and then put forward the basic ideas of implementing NDC in China.