China, with its rapidly aging population and retirement age among the world’s lowest, quietly announced last week that it will gradually raise its retirement ages over a 15-year period, starting next year.
Over the next 15 years, retirement age in China will go from 60 to 63 for men; 55 to 58 for white-collar women; and from 50 to 53 for blue-collar women
After four days of deliberation (and no public consultation process), the country’s top legislative body on Sept. 13 approved a plan to incrementally lift the retirement age over the next 15 years for men from 60 to 63 (which will be reached by 2035), starting Jan. 1, 2025. For women in white-collar jobs it will be raised from 55 to 58, and for women in blue-collar work from 50 to 55.
Additionally, the minimum years of pension contributions required will also rise from 15 to 20 years starting in 2030.
China’s pension system generally operates on a three-tiered framework, with the first pillar being a government-mandated, pay-as-you-go structure funded by contributions from both employers and employees. Workers contribute around 8% of their salary while employers contribute between 14-20%. The second pillar consists of voluntary annuities or pension schemes offered primarily by larger employers which supplement the basic government pension. The third pillar consists of voluntary individual retirement accounts similar to 401(k)s.
China set its retirement ages in the 1950s, when its population lived much shorter lives on average and most people did grueling agricultural work. The ages haven’t been adjusted since—until last week’s announcement. Today the country’s average life expectancy is 78.
China has one of the most rapidly aging populations in the world. Before the COVID-19 pandemic, the World Health Organization estimated that 28% of the population would be over 60 years old by 2040. The country has nearly 300 million people aged 60 or older in 2023, a figure projected to reach 400 million by 2035.
Deng Yuwen, former deputy chief editor of the Central Party School journal Study Times, told the South China Morning Post the government could not afford to wait any longer.
“[This] has come at a very challenging time for China,” Yuwen said. “But Beijing had to act because the rapidly greying population, plummeting birth rate and ballooning budget deficit are all clearly going to ignite China’s pension crisis—probably much earlier than Beijing has anticipated.”
Indeed, as Foreign Policy Magazine points out in a Sept. 17 article, China’s pension system is already on very shaky ground. The Chinese Academy of Social Sciences estimated in 2019 that the urban worker pension fund will be out of money by 2035. Media discussion of the issue has made Chinese workers even more determined to protect the rights that they have. Reforms intended to push middle-aged people to open individual retirement accounts have flopped. The people are convinced that this is the government’s job, not theirs.
China is also careening toward a demographic crisis thanks to that greying population and a birth rate that has plummeted over decades. There are too few young people and even fewer babies, and young people are resistant to Confucian-inspired mandates that children have a duty to support their elderly parents—especially when its one-child generation is being squeezed by the so-called inverted pyramid that leaves four grandparents and two parents dependent on one child.
According to a press release from The State Council Information Office, The People’s Republic of China, Chinese Premier Li Qiang on called for the steady and orderly implementation of the reform on gradually raising statutory retirement age to provide important support for advancing Chinese modernization.
Li, also a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, made the remarks during a State Council meeting on mobilizing efforts for the reform.
Li said the reform “aligns with the objective requirement to proactively address an aging population and promote high-quality population development as well as the practical necessity for fully unleashing talent dividends and facilitating Chinese modernization,” per the press release. He noted that the reform is a significant move to improve the social security system and better safeguard and improve people’s livelihoods.
While French President Emmanuel Macron’s unpopular plan to raise France’s retirement age from 62 to 64 enacted last year led to weeks of widespread national protests, to date there have been no reports of protests in China.
SEE ALSO:
• Why China is Finally Embracing Private Retirement Savings
• These are the Countries with the Earliest and Latest Retirement Ages
• Macron Raises French Retirement Age to 64 Despite Strong Opposition
• Most Brits Believe UK Retirement Age Should Be Lowered: Survey
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.