What Is the Pensions Crisis?

As the social aging of the developed countries becomes more and more obvious, the problems of the pension system will further worsen, and it is easy to cause crisis in pension security and pension payment. Retirement may become an unaffordable burden in the future. ^[1]

Pension crisis

Increased pension costs

In 1935, when the United States first introduced the National Pension System

In accordance with China s current social pension system,

Face up to the "crisis in retirement"

By 2035, there will be less than two taxpayers supporting one pensioner

China is rapidly entering a deeply aging society.

The international community defines the process of an aging society by the proportion of the population aged 65 and over: the standard for entering an aging society is 7%, the standard for a deep aging society is 14%, and the standard for a super-aging society is 20%. According to this standard, China has entered the aging society around 2000, it will enter the deep aging society by 2025, and it will enter the super aging society by 2035. The aging process rapidly surpassed the United States, and gradually surpassed the United Kingdom, France, Canada and other countries. And close to Germany and Japan. China's "age crisis" is gradually emerging:

-Crisis 1: The burden of old-age support is large. As shown in Figure 1: In 2012, China's working population (15-64 years old) has begun to decline, the elderly population (over 65 years old) has accelerated to rise, and the period of demographic dividends is about to end. After deducting school students, the unemployed, the low-income population who has not reached the tax threshold and the population who retired before the age of 64, by 2035, there will be less than two taxpayers supporting one pensioner.

The data shows that the current internal support ratio of China's enterprise employee endowment insurance is 3: 1, while the more developed provinces such as Jiangsu and Zhejiang have actual support ratios of less than 2: 1, which means that China has partially entered the "super-aged society".

Crisis 2: The number of births has decreased. From 1980 to 2009, China had fewer than 400 million children, and the total fertility rate dropped from 20 to about 12 . If the current family planning policy is not adjusted, in the peak period of the elderly population in the future, the working population will fall into a situation of bearing two children, raising an elderly person and helping the poor, and the employment shortage will intensify, high aged care and medical care. Expenses will become the two mountains that the elderly bear.

Crisis 3: The proportion of low-income people is too large. The National Bureau of Statistics first General Survey on the Property of Chinese Urban Households shows that, as of the end of June 2011, the average value of Chinese urban households property had reached 228,300 yuan; the average household savings deposit was 51,200 yuan, accounting for RMB financial assets 69.4%; Gini coefficient is about 0.48-under the conditions of a large proportion of the poor, lack of value-added channels for the allocation of household assets, and inadequate pension assets to enter the deep-aged society. Not only the elderly, but many poor people awaiting support.

Crisis 4: The proportion of the unemployed is large. By 2030, China will have 900 million working people. If the real unemployment rate is 5%, the actual employment will decrease by 45 million, and the ability to support the elderly will decline.

Crisis 5: The retirement age is low. The retirement age in western countries is generally 65-67 years. The legal retirement age in China is 45 (hard jobs), 50-55 (females), and 60 (males). The average actual retirement age is 55. Premature retirement age, coupled with the issue of early retirement, has reduced the old-age dependency ratio to less than 2: 1, and we should consider implementing a "retreat step" to implement a delayed retirement policy.

Experience at home and abroad shows that the strategy for social development of the elderly must allow the elderly to own assets and purchasing power, and young people to have human capital and productivity. As long as the elderly pay the bill, the company will have the order, and the young people will have jobs. This requires dividends from the elderly population in the reform.

The data shown in Figure 2 shows that due to the high cost of education and the consumption of married homes in China, the consumption level of the elderly population has become lower, which is far from the requirement of the elderly population for the "aging population dividend".

The smooth connection between the labor population bonus and the old people's dividend, on the one hand, it is necessary to change the development mode, increase residents' income, improve the pension structure, and cultivate pension assets. During the "Thirteenth Five-Year Plan" period, we entered a comprehensive well-off society that is "old is rich". At the same time, it is necessary to appropriately adjust the family planning policy to ensure that when China enters the "super-aged society" in 2030, the population structure will begin to become reasonable.

Eliminate the "illusion of retirement"

There is a huge gap between the traditional concept of old-age care and the reality of aging society

Many people blurt out when talking about "old age": I have money, I have social security, I have children, I have a house, I go to a nursing home ... However, in fact, there is a huge "fall" between the traditional concept of old age and the reality of old age ", As follows:

The illusion of monetary pension: At the current stage, the insufficient coverage and low level of basic pensions make residents feel insecure about the future. This has caused residents' savings to remain high for a long time and become the main means for people to hedge against future risks. However, monetary pensions can only meet the daily expenses of the elderly, they cannot fully cover the risks of inflation and solve the high-cost elderly medical and nursing problems.

Government illusion: As of the end of 2011, China's total planned and organized pension reserves were only 3,568.9 billion yuan, accounting for only 7.5% of the GDP of the year, and only 2600 yuan per capita. The government provides a "full coverage, basic insurance" basic pension, which can only solve the problem of elderly people's meals. In addition, the government is also facing huge economic pressure and credit risk in the face of accelerated population aging.

Illusion of raising children and preventing old age: As the first generation of China s only children enters the marriage and childbearing age, it presents a family model of 4-21. Each couple is burdening their own lives, buying a house, medical treatment, pension and While the children are educated, they must support and support the four elderly people, which is undoubtedly a heavy burden. According to the National Bureau of Statistics data in 2012, less than 4% of the people agreed to raising children and preventing old age.

The illusion of home care for the elderly: Survey results in Beijing, Shanghai and other places show that 90% of the elderly are willing to live at home, which is normal. However, after the problems of losing his wife, busy children, gradual loss of self-care ability, and the inability to afford caregiver services, the family's elderly care function gradually weakened, and even the elderly died at home without anyone knowing.

Illusion of institutional care: At present, there are only 1.8 beds per 100 elderly people in China, and most elderly care institutions can only take care of the elderly's basic daily diet, failing to take care of the psychological and spiritual needs of the elderly, leading to the early stage of demented elderly. China already has more than 10 million elderly people with severe illness and more than 30 million people with moderate dementia, more than 2% of the total population, greatly increasing the cost of providing for the elderly. China urgently needs to comprehensively plan a social pension service system to improve the environment for senior citizens to entertain, comfort and socialize.

"Illusion" of housing pension: "House pension" refers to the sale, replacement and mortgage of the elderly's real estate in exchange for a generalized pension for the purchase of elderly services and living in elderly apartments. If housing pensions are considered as commercial financial products, commercial organizations will inevitably extend their life expectancy due to concerns about longevity risks. The result is to try to reduce real estate mortgages to levels that are difficult for residents to accept.

One of the prerequisites for the implementation of "housing for the elderly" is that the old man's house is bought and its value is equal to the labor cost of old-age care. The continued low fertility rate in China means that the number of young people who get married and buy a house will decrease significantly after 2025. At the same time, the first baby boomer population in New China will begin to decline. To solve the problem of low-rent housing and residential first housing.

In short, simply relying on any of the "conditions" mentioned above to discuss the issue of pensions will produce unrealistic "illusions". Managing pension risks requires the efforts of the whole society, including fostering pension assets, building pension finance, and building a socialized elderly service system.

Cultivate "pension assets"

Buying commercial insurance is an important supplementary security measure

Faced with the gradual approach of an "aging society", merely raising the level of basic pensions is not enough to solve the hidden pension concerns in Chinese society, and it is necessary to reserve all-rounded "endowment assets". Pension assets include four basic contents: pensions that can provide daily expenses, and medical security, living and nursing expenses. More and more people are realizing that the burden of geriatric medical care and geriatric care is getting heavier, and it is difficult to fight with pensions alone.

According to the data released by the Audit Office in 2012: From 2005 to 2011, the average annual pension of Chinese enterprise employees increased by 13.4%, from RMB 713.25 per person per month in 2005 to RMB 1516.68 per person per month in 2011. However, China's pension replacement rate has been decreasing year by year. In 2011, the enterprise pension replacement rate was only 42.9%, while the ILO minimum standard was 50%. Generally, a pension replacement rate of more than 70% can maintain the living standard before retirement, 60% can maintain the basic living standard, and if it is less than 50%, the living standard will drop significantly compared to before retirement. For an ordinary employee, the monthly salary in the year of retirement is 3,000 yuan. If the pension is 1800 yuan to 2100 yuan, the basic standard of living can be maintained; if it is less than 1,500 yuan, the standard of living is difficult to maintain.

The disappearance of the working population dividend will lead to higher and higher costs for old age services, which cannot be fully borne by the state. Social pooling and personal accounts are like two cars on the road, with different functions: one is a "bus", which is used to overcome poverty, pay basic pensions, share basic and serious medical costs, and protect a house; the other It is a "private car" that is used to improve life, including personal pension savings, unit pension annuities, pensions cashed by merchant consumption points, etc., as well as supplementary medical insurance and housing improvements.

Pension assets are not personal savings deposits in the narrow sense, but are supported by laws and policies, and realize the safe custody and preservation and appreciation of personal and family pension "wealth" through integrated financial services with low profits. Banks, insurance, trusts, and funds each have their own functions in the process of preserving and increasing the value of pension assets. Among them, commercial insurance is an important supplementary protection and financial management tool.

The development of commercial endowment insurance is conducive to improving the endowment security system. International experience proves that social basic pension insurance, enterprise supplementary pension insurance and commercial pension insurance are the three sources of pensions.

At present, China is building such a "three pillars" pension system. China has entered an aging society. If there is no reasonable plan to address the risk of pensions, people will reduce current consumption because of concerns about future life security. Commercial endowment insurance is a market-based and socialized endowment risk management mechanism that can effectively address family endowment risks, reduce people's sense of insecurity, and help stimulate family consumption and promote economic development.

The protection function of commercial endowment insurance is changing with the social transformation, from the traditional business model of passive risk savings plus claims, to the business model of low-margin comprehensive management, providing financial services for customers, and managing pension risks.

Take Taiping Jinyue Life Backgammon (21.62, -0.38, -1.73%) financial planning as an example. The plan is designed according to the financial life cycle of a person's life. From education subsidies, marriage and home purchases to pension reserves, you can receive them in stages according to the needs of your life. Under the condition that the state pays basic pensions, the amount received at the age of 66-88 can be used as an effective supplement for pension funds. For example, a 30-year-old male will invest 38640 yuan each year to participate in the financial plan and pay for 10 years in a row, then he will be guaranteed to receive 5,000 yuan every two years after the insurance, 10,000 yuan every two years after the age of 40, and every two years after the age of 50. It is guaranteed to receive 15,000 yuan per year, 20,000 yuan every two years after 60 years old, and 30,000 yuan annually from 66 years old until 88 years old.

In addition, during the term of a commercial pension insurance contract, customers also enjoy benefits such as death protection and accidental high disability premium exemption. In addition to the fixed collection, the insurance company will distribute the distributable surplus to customers every year according to the contract. It can be seen that the commercial endowment insurance has four functions of planning, financial management, value preservation and protection. Coupled with the policy loan function, it can also solve the urgent needs when funds are tight.

In short, population aging is an irreversible social phenomenon. Pension assets and pension finance must be jointly created by the government, enterprises, markets, individuals, and families. As long as we plan early and plan from many sources, we will be able to successfully meet the baptism of the "silver hair wave", ensure the steady and healthy development of the economy and society, and allow each of us to enjoy our old age with dignity. ^[2]