Raising the retirement age: the impact on the individual and actuarial balance for Chinese urban workers’ basic pensions

Xiaojun Wang and Ge Shan

Economic and Political Studies, 2016, vol. 4, issue 4, 397-413

Abstract: Rapid population ageing and increasing longevity are raising concerns about the sustainability of the basic pension systems in China. Raising the retirement age, as an important way to maintain long-term financial sustainability, has become the main policy choice for China. Some studies show that postponing retirement can solve the financial pressures of pension systems effectively. However, if the pension benefits increase with the pensionable age, this may offset some effects and even have a negative impact on the financial balance. This paper builds cohort models and period actuarial balance models for Chinese urban workers’ basic pension system to measure the cohort and period effects of postponing retirement, with the aim of analysing the change in the individual pension net wealth and the long-term actuarial balance of the system with population ageing and increasing life expectancy. The result shows that raising the retirement age, which is linked to life expectancy, will lead to an increase in the pension benefits, individual net pension wealth and then pension fund expenditure. It may benefit the individual and short-term actuarial balance but have a small effect on the long-term actuarial balance of the system.

Date: 2016
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DOI: 10.1080/20954816.2016.1251135

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