Institutional guarantee given that pension fund can meet future needs

AFTER A REPORT issued by the Social Security Research Center with the Chinese Academy of Social Sciences earlier this month hit a nerve by predicting the pension fund may face a shortage as early as 2035, the Ministry of Human Resources and Social Security said on Tuesday that China's pension fund is sufficient to meet the needs of retirees in the long run. China Daily reporter Li Yang comments:

There has long been concern that the pension fund may run out of money because of China's fast aging society, so the ministry's response is necessary to boost confidence in the viability of the pension system and dispel people's worries.

Certainly, the report－whose conclusion is based on the worst-case scenario－can help policymakers focus attention on the pressure China's pension fund has shouldered for a long time. Which should prompt the social security authority to take more foresighted measures to rein in the potential risks and ensure the sustainability of the fund.

It is almost certain that the retirement age will have to be further raised from the current 60 for men and 55 for women to around 65 or above as is the case in many developed countries.

The central authority has every reason to set aside more of the profits of State-owned enterprises and provide more direct financial support to beef up the pension fund, while encouraging employees as well as their employers to take the initiative to pay for the pension insurance, which is the most important and reliable source of income for the fund.

And those managing the pension fund can further expand the current investment scale, for instance in the stock market, which has been piloted for nearly two years, and yielded fair returns so far.

In this process, the provincial departments in charge of local pension funds should enjoy more autonomy to explore new investment opportunities to preserve and increase the value of the local pension funds, and this must be done prudently and strictly supervised.

Also, the government can open up the pension insurance market to more insurance companies from home and abroad so that people have more choices to invest for their retirement.