Pension System And Its Pricing Study

With the continued perfection of the socialist economy and the further deepening of enterprise reform, it has become imperative to reform and perfect the pension system and to improve social security financial management. This has assumed a major role in the economic system reform and the economic development strategy.The aging population is placing more and more strains on the economic growth and social stability. In developed countries, the aging of the population usually came after the industrialization, and the process underwent at a slow pace. While in China, it comes at a time when the nation is on its way to industrialization and the economic construction is demanding capitals. This make China face great difficulties in resource allocations. According to the statistics from the World Band, in 1990, the population aged over 60 accounted for an average 8.9 per cent in China. China has come into an era of fast aging population. By 2010 and 2026 the ratio will be 12.0 per cent and 18 per cent, respectively. Therefore, it is very significant to research pension scheme system, which include its contribution, retirement benefits, fund investing and tax revenue discounts.After more than ten years of reform, a pension scheme system with Chinese characteristics which is fit for the market economy has taken shape. However, as China's administrative control system and economic mechanism are undergoing reform and readjustment, the pension scheme system faces many problems. The transform from pay-as-you-go system to partial funded pension system has generated huge gap of pension payments. It is critical to solve the problem of potential pension liability for the sucessful transformation of pension system.This article consists of four main parts. In the first part, We will introduce the operating of pension scheme and its relevant notions. In the second part, the actuarial models will be set up to individual account pension. After that, we will calculate China's potential liabilities roughly formed by turning to partially funded pension system from existing systems. In the forth part, three type of pension schemes will be integrated by introduce options, in which we give a contribution principle and solve the optimal contribution rate on a DB pension scheme.