Pension reforms help promote social equality

But if the country, the employer of civil servants and public sector employees, does not allow to contribute on pension, forcing payment of the contributions postponement of the actual expenditure for, say, decades, the standard fully funded defined contribution plan will possibly turn into pay-as-you-go defined benefit plan.

It is important to understand the significance of organizational payment, the relationship between current fiscal burden and long-term system construction, as well as the relationship between current expenditure and future revenue after the reform of the occupational pension scheme for civil servants and public sector employees.

If organizational payment of civil servants and public sector employees' occupational pension is paid by credit on account instead of real contributions, it will lead to several problems. First, it will challenge the equality of the pension system, prompting people to suspect that there exists a special pension system for civil servants and public sector employees.

Second, civil servants and public sector employees will feel they are suffering a loss because their personal accounts are empty.

Third, different pension schemes for employees of government departments and public institutions and those employed by enterprises will have a negative impact on labor mobility.

Fourth, if the authorities decide to pay on account, it would require legislative amendment and establishment of a new pension model.

Fifth, considering the risk of local government debt, the authorities, by paying pension on account, will increase recessive debt in the future because of the aging population.

And sixth, a contract-and-debt-type occupational pension scheme is not in accordance with the global trend.

The author is director of Center for International Social Security Studies, affiliated to the Chinese Academy of Social Sciences.

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