Selection Of The Financing Mode For Chinese Urban Employees’ Pension System

Along with the rapid development of economics, aging population has become gradually obvious in China. According to the5th population census in2000, the ratio of65years old and over population to total population was7%, which has reached the international standard of aging society; this ratio has increased to8.9%in2010. The United Nation estimates, the ratio will increase to28%in2040; exceed that of America in the same period. With the rapid increase of aging population, the current pension system is facing unprecedented burden and challenge. Unlike developed countries, Chinese aging population has the following special characteristics:Rapid speed of aging results from low fertility and mortality; aging before getting rich; rural aging population was significantly higher than urban; aging population develops unbalance regionally. Adjustment and reform of pension system are extremely urgent in cope with aging, and the study of financing mode is of great importance in the study of pension system, since the financing mode of pension system related to a series of crucial issues, such as national saving rate, income distribution, the supply o f labor and so on.Among the four types of pension systems in China, urban employees’ pension system sets up at the earliest time; covers the most people (including all employees except these from public institutions).The financing mode of urban employees’ pension system consists of2parts:one is social pooling account, composed of20%of employees’ salary paid by enterprises; one is personal account, composed of8%of employees’ salary paid by employees themselves.With the coming of aging society, whether the proportions of the2big accounts need to adjust and reform has become a crucial issue in theoretical and academic research. This paper is study on the financing mode of urban employees’ pension system. In terms of theoretical significance, this study helps to enrich the theory of pension system in China; in terms o f practical significance, this study helps to provide some reference suggestions for the reform of Chinese pension system.Focus on the study of selection for financing mode of pension system, this paper, firstly, estimate natural population growth rate in urban areas via grey system model; then basing on lapping generations’ model, puts forward the optimal combination rate of social pooling account and personal account under different natural population growth rate; and finally provides some suggestions for the financing mode of pension system according to the estimated pooling ratio.This paper is structured as follows:Firstly, traces the development of Chinese aging population and pension system of urban employees, and analyzes the impact of aging on pension burden rate, pension benefit and financing theoretically. Secondly, estimates natural population growth rate in urban areas for the future2decades via discrete grey system model. On the one hand, these estimated data can be used to calculate optimal pooling rate; on the other hand, we can deduce the trend of aging according to the changing of natural population growth rate in urban areas. Thirdly, estimates the optimal pooling ratio via lapping generations’model. After processing and predicting all main factors related to pooling ratio, this paper finally provides the optimal combination rate of social pooling account and personal account under different natural population growth rate, and draws the conclusion that financing mode is closely related to the speed of economy growth:in the condition of rapid speed growth, totally PAYG is the optimal choice; in the condition of slow speed growth, totally fund system is the optimal choice; whereas for the current growth speed, the combination of the two with more ratio for personal account would be the optimal choice.The main innovations of this paper are:first, innovation of research perspective. This paper provides the optimal share of the two pension system under different degrees of natural population growth rate by the using of quantitative analysis; second, innovation of data processing. This paper takes different levels of natural population growth rate, wage, interest rate into consideration, in order to eliminate the possibility of misestimate of optimal pooling ratio as a result improper selection of data.The deficiencies of this paper lie in:first, fail to consider other related factors to the ratio of laboring population to aging population except natural population growth rate, such as living standard, medical state and many other difficult predicting factors, which may lead to the misestimating of optimal pooling ratio. Second, all factors in the lapping generations’model didn’t distinguish different period, to make the predicting pooling ratio more accurate, this paper finally puts forward9ratios instead of giving a confirm ratio according to Chinese population structure and economy state.