China has made significant strides in its pension system, with the basic pension scheme covering over 1 billion people and accumulating a balance of 7.82 trillion yuan ($1.1 trillion) by the end of 2023. This makes it the largest social security system in the world. The country’s pension system consists of three pillars: the public scheme, as well as the enterprise and private schemes.
The first pillar, led by the government, is a compulsory pension scheme designed to provide basic pension security for insured persons after retirement. The second pillar includes the voluntary pension plan for corporate employees and the occupational pension plan for government employees. By the end of 2023, the voluntary corporate scheme had covered 141,728 enterprises and 31.44 million corporate employees, with the balance of employee pension funds reaching 3.19 trillion yuan.
The occupational pension plan for government employees, established in 2014, is compulsory and had an operating investment scale of 2.56 trillion yuan by the end of 2023.
China’s comprehensive pension coverage
The third pillar involves the voluntary private pension scheme, which China launched in its pilot phase in November 2022.
As of June 2024, over 60 million people had opened private pension accounts, and by September 2024, there were 103 private pension insurance products available. At the Financial Street Forum 2024 in Beijing, experts discussed the importance of these three pillars in providing comprehensive pension security and enhancing the quality of life for retirees in China. Ye Haisheng, chairman of Guomin Pension & Insurance Co., highlighted the significance of the private pension system within the overall pension framework, while Zheng Bingwen, director general of the Institute of American Studies at the Chinese Academy of Social Sciences, shared insights on community services for the elderly.
The local pension funds managed by the National Council for Social Security Fund (NCSSF) have also seen success, with an average annual investment return rate of 5 percent since the end of 2016. In 2023, the investment income of the local pension funds amounted to 39.589 billion yuan (5.6 billion U.S. dollars), with an investment return rate of 2.42 percent. As China continues to develop its pension system, it aims to address the challenges posed by its aging population, with the number of elderly people expected to reach approximately 400 million by 2035.
The three pillars of the pension system work together to provide a comprehensive safety net for retirees and ensure their financial security in their golden years.
