Pension reforms help promote social equality

The State Council, China's Cabinet, announced pension reforms for civil servants and public sector employees in Jan 2015, bringing them under the purview of the urban basic pension insurance scheme. The historic move signifies the abolition of the fragmented pension fund systems and the end of the privilege pension system for public sector.

Civil servants and public sector employees are mainly responsible for the smooth running of the State machinery. So, the pension reforms will not only help build a modern and more effective governance system, but also safeguard the interests of the nation's vital workforce by allowing them access to a pension scheme that is independent of the organizations they work for. The reforms will also protect their pensions irrespective of the changes that may occur in the future.

In addition, the reforms will help the movement of workforce between the public and private sectors by eliminating the different pension insurance schemes in the two sectors, and alleviate the fiscal risk arising from the aging population. The current dependency ratio of the urban employees' pension scheme is 3:1, that of public sector employees is 2.5:1 and civil servants 2:1. In this context, the reforms will promote social equality because the replacement rate of financially supported civil servants' and public sector employees' pension scheme is on average about twice that of employees in other enterprises.