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Assessing the Financial Sustainability of the Pension Plan in China: The Role of Fertility Policy Adjustment and Retirement Delay

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  • Huan Wang

    (Research Institute for Population Science, School of Public Administration, Hohai University, Nanjing 211100, China)

  • Jianyuan Huang

    (Research Institute for Population Science, School of Public Administration, Hohai University, Nanjing 211100, China)

  • Qi Yang

    (Research Institute for Population Science, School of Public Administration, Hohai University, Nanjing 211100, China)

Abstract

Population aging is creating serious challenges for the sustainability of China’s pension system. To mitigate the adverse impact of the demographic shift, China has recently introduced fertility and retirement policy reforms. The research presented in this paper primarily evaluates the impacts of recent reforms on the financial sustainability of China’s Urban Employees’ Pension Plan (UEPP). By using the Leslie matrix and actuarial models, the financial sustainability of the UEPP from 2019 to 2070 is projected and evaluated under a set of assumed policy reform scenarios. The results indicate that an imbalance in the pension fund would occur in the early 2020s and then expand under existing policies. Fertility adjustment, retirement delay, or combination reforms would not fundamentally solve this financial crisis in the long term. When 100% of couples have a second child and the retirement age is increased to 65, the current and accumulated pension deficits would drop by 50.05–67.56% and 35.88–54.23% between 2040 and 2070, respectively. Supplementary policy measures should be designed to encourage childbearing and retirement delay, including family support policies and top-designed pension system reform policies.

Suggested Citation

  • Huan Wang & Jianyuan Huang & Qi Yang, 2019. "Assessing the Financial Sustainability of the Pension Plan in China: The Role of Fertility Policy Adjustment and Retirement Delay," Sustainability, MDPI, vol. 11(3), pages 1-20, February.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:3:p:883-:d:204332
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    2. Min Qin & Jane Falkingham & Maria Evandrou & Athina Vlachantoni, 2020. "Attitudes and preferences towards future old-age support amongst tomorrow’s elders in China," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 43(11), pages 285-314.
    3. Xiaohua Chen & Zaigui Yang, 2019. "Stochastically Assessing the Financial Sustainability of Individual Accounts in the Urban Enterprise Employees’ Pension Plan in China," Sustainability, MDPI, vol. 11(13), pages 1-20, June.
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    6. Zheng Shen & James Yang, 2021. "A Simulation Study of the Effect of Delayed Retirement on Welfare of the Elderly: Evidence from China," SAGE Open, , vol. 11(2), pages 21582440211, June.
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    8. Deng, Xin & Yu, Mingzhe, 2021. "Does the marginal child increase household debt? – Evidence from the new fertility policy in China," International Review of Financial Analysis, Elsevier, vol. 77(C).
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