The Research On China’s Implicit Pension Debt

Based on the review of the development history of China’s endowment insurance system, this paper discusses several aspects of China’s implicit pension debt including concept, causes, calculation and repayment to promote the development of China’s endowment insurance system.The direct cause of China’s implicit pension debt is the transition of endowment insurance system. Without the accumulation of pension under pas-as-you-go, what workers received was pension promises made by the government, which became implicit pension debt when endowment insurance system transformed into partially-funded and visualized gradually as time went on. Meanwhile, the increasing aging problem further accelerated the development of the visualizing process.The paper divides employees into four sorts, old retired employee, new retired employee, employee on hire and fresh employee, and separately establishes implicit pension debt’s actuarial model of each sort, the applicable condition of which is given at the same time. Combining with the latest population and economic data, this paper calculates the scale of China’s implicit pension debt based on both of the closed system and open system. Under the closed system, the paper mainly calculates the debt of the traditional old employee and employee on hire, while studies the influence the fresh employee makes to pension debt under the open system. In the process of calculating, the paper further studies how each factor influence the scale by adjusting each parameter’s value in actuarial models. Then we draw conclusions as following:The scale of pension debt is much larger than expected. Along with the increase of the indexation adjustment proportion of pension relative to wage growth, the scale of pension debt will increase gradually. Along with the increase of the return on investment, the scale of pension debt will decrease gradually. Along with the delaying of retirement age, the scale of pension debt of the employee on hire will decrease gradually. The join of the fresh employee is not always promoting the development of endowment insurance system but bright new debt. However, the insurance cost paid by the fresh employee can broaden the pension fund sources and increase endowment fund income to some extent.By calculating the scale of implicit pension debt, we can get that it is imperative to solve implicit debt problems. We can take measures to reduce the spending of pension, for example, reduce the indexation adjustment proportion and prolong the retirement age, while we can increase the value of pension fund by investing to increase pension income. In addition, we can take other measures to assist, for example, expanding the coverage of endowment insurance, transferring the state-owned assets into pension fund and so on. In a word, we can solve the implicit pension debt problems from both of opening source and throttling.