Pension Plan to Benefit China's 900 Million Farmers
By Li, Shuncheng,
August 5 2009
Farmers will soon enjoy the same guaranteed incomes later in life as urban
workers do, as the government Tuesday announced that a trial pension plan
would be implemented across China by October.
Sponsored by the government, farmers over the age of 60 will be able to
receive a monthly endowment of varying amounts according to certain areas'
income standards, Hu Xiaoyi, vice minister of the Department of Human
Resources and Social Security (DHRSS), said yesterday at a press
"The new system is paid for by the farmers, collective benefits and
government subsidy, which is totally different from the old system, paid
by farmers themselves, with no subsidy from the government," Hu said.
He also said that the payment for the insurance comprised two different
parts: basic insurance, which is fully provided by State financing, and
the personal pension account, paid by farmers themselves.
The old insurance system has benefited 80 million farmers in China since
the 1990s. However, the system virtually failed, as it required payment
solely from farmers, who eventually gave up because of a lack of money.
In June, Chinese Premier Wen Jiabao decided to launch the trial projects
in 10 percent of counties to promote the new insurance during the State
Council executive meeting.
A total of 3 billion yuan from the central government was provided to
subsidize local governments, ensuring that farmers can get enough basic
insurance. According to the DHRSS, the subsidies for western provinces,
the central region, and the eastern provinces are different, based on the
minimum standards for pensions.
Rural residents over 16, who are not students and do not participate in
the basic pension plans for urban workers, can take part in the new
insurance scheme, according to the DHRSS.
Some richer areas along the Yangtze River Delta, and some coastal cities,
have been trying out similar rural pension plans since 2003.
Donghai County, in Jiangsu Province, is one of the pilot sites. Wang
Tonghua, who participated in the new endowment insurance plan last year,
was happy with the new system. "I've always been jealous of the
elderly in cities who receive retirement pensions, now I finally get my
own," Wang told Xinhua.
In Donghai in 2008, the payment for insurance was based on 20 percent of
the local per capita income of that year, of which 80 percent was paid by
individuals, and the remaining 20 percent by governments at county and
In 2008, the lowest payment was 800 yuan. Wang paid 640 yuan, and the
subsidy from the county and village governments was 160 yuan per month,
respectively. She will therefore receive no less than 260 yuan after
"I feel happy that farmers can get a pension now, although it's not
that much. As you know, only workers in the cities can get it," Chen
Dajin, a 63-year-old farmer in Tangwei county, Suzhou, said, adding that
he and his wife can get 300 yuan in pension every month.
In Suzhou, a city in Jiangsu, men over 60 and women over 55 can receive
the retirement pension each month, without paying any money.
The biggest obstacle in applying for the new insurance is the low revenue
of local governments.
"Local governments with low revenue have no capability to promote the
new policy. With no financial support from the local government, the
related department has no enthusiasm to promote the new insurance,"
said Ding Yifan, a researcher at the Development Research Center of the
While the old insurance allowed for management fees for the government,
the new one prohibits the local government from extracting any management
fees from the funds.
"The new insurance policy strives to achieve two things: one, to
reduce the economic and policy gap between urban and rural areas, and the
other is to solve the difficulties faced by the elderly in rural areas and
help with implementing a rural population policy," Ding said.
Once put into action, the trial program will have a huge influence on
China's social security system, as it encourages farmers to purchase
endowment insurance for a more secure life, according to Ding.
Ding suggested that the governments make a reasonable and balanced
He also called on the government to promote and implement this new
endowment insurance policy as soon as possible.
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