The Replacement Rate And Influencing Factors Of New Rural Social Old-age Insurance

The new rural social old-age insurance is another significant policy benefiting the rural people after the abolishment of agricultural taxes, the direct agricultural subsidies policy and the new-type rural cooperative medical service system. The fundamental principles of this new rural old-age insurance are "the guarantee for the basic insurance, the wide coverage, the flexibility and the sustainability". Experimenting in the10%of the counties (cities or districts) of China in2009, the full coverage of this system will be achieved in2020.Although this new rural old-age insurance system is in full swing, with an extending coverage in the pilot areas, the experimenting methods and measures vary distinctly because of the different economic developing level, the restrictions of fiscal capacity and the different attitude of local governments. According to the survey, some local governments take compulsory measures and impose uniformity in insurance subsidies in order to achieve the goal of expansion in coverage, which resulted in the low activity and initiative of rural residents and the restriction in their choice of paying grade. The substitute rate is a direct factor which influences the rural residents’ participation in new rural old-age insurance, while the higher the rate is, the more attractive the insurance is to the rural residents. In the present experimenting period of new rural old-age insurance, because of the rigidity of welfare and the above stated principles of this policy, the pension suffers from low profit and low substitute rate, which can neither satisfy the basic standard of living nor distinguish from the Subsistence Security System. All these factors reduce the rural residents’interest in this policy and their initiative in participation. This thesis attempts to make an overall analysis of the factors which influence the substitute rate and accordingly proposes the solutions, including the high earning rate for the pension account, higher than the deposit interest of the bank in the same period of time and adjusted according to the inflation rate and interest of bank to increase the accumulation of rural residents’ personal pension account and enhance the level of substitute rate. Additionally, measures should be adopted to strengthen its attraction and encourage the rural residents to choose higher paying levels, which helps to form a virtuous circle of policy. The funds resulted from the higher interest higher than the deposit interest of banks should be under the responsibility of the nation as part of the benefiting policies, which will lighten the burden of local government and rural residents, in order to enhance the policy of new rural old-age insurance and realize the sustainable development of this policy. Therefore, the process of urban-rural integration can be accelerated with the promotion of the connection of policies of pension insurance between rural and urban.