Dual pension system

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Retirees get their pension. [File photo]

The dual pension system (退休双轨制) is the peculiar product of China's transition from a planned economy to a market-oriented one. It refers to different pension systems adopted by retirees of different work characteristics.

China has embarked on pension system reforms since 1992 and adopted a dual pension scheme, which includes the implementation of different pension institutions according to different posts. Retirees from government bodies and institutions retire with pensions paid by the public finance, while employees of private enterprises have to comply with a "contribution system," which requires contributions of both enterprise and the employee to a certain extent.

It is reported that pensions of retirees from government agencies and public institutions are twice or three times those of private enterprise employees with the same position. The inequality of the dual pension system leads to large gap between pensions. As it is the primary factor in unfair distribution, eliminating this system plays an important role in narrowing income disparities.

Ever since 1992, the pension gap has become broader and broader, resulting from the dual pension scheme. In the past few years, the government has made seven rectifications in the pension of enterprise employees in order to bridge the gap caused by different ranges of adjustment. However, these seven rectifications stand equal to less than one rectification made within the government bodies and institutions, which broadens the gap to as much as 5,000 or 6,000 yuan. At present, pension inequality is still inclined to increase.

On Jan. 28, 2009, the Plan for Reforming Pension System in Government Bodies and Institutions was formally issued and the Ministry of Human Resource and Social Insurance implemented pilot reform programs in Shanxi, Shanghai, Zhejiang, Guangdong and Chongqing. Nevertheless, the pension system reforms in these five places have hardly achieved any success over the past three years.

Yin Chengji, spokesman for the Ministry of Human Resource and Social Insurance, indicates that the central government pays significant attention to the reform of the dual pension scheme, and has adopted a series of measures. The basic pension of enterprise retirees is improved in 2013 for the ninth consecutive year. A drastic increase was seen when the monthly pension reached as high as 1,721 yuan per capita in 2012, a 1,200 yuan increase compared to the 2005 number. And with a ten percent increase, the monthly pension will settle at 1,900 yuan in 2013, he said.

The Chinese government is committed to enhancing the old-age insurance system and to ensure that each individual or institution pays endowment insurance and enjoys equal benefit. The present pension system only covers part of the employees. Some retirees from government bodies and institutions are not incorporated into this system.

The 12th Five-Year Plan for the Construction of the Social Old-age Service System , released by the Ministry of Civil Affairs, points out that as of 2015, the government will set up a sound system of a modest size, with proper management, quality service, effective supervision and sustainable development, according to the MCA website.