A senior official of the Ministry of Human Resources and Social Security (MOHRSS) revealed to the 21st Century Business Herald on September 25 that a draft mechanism for transferring urban residents’ pension funds, and two pilot programs of pension systems for migrant workers and farmers, have been referred to the State Council for approval and may be implemented at the end of this year.

Under the new system, the Social Security Agencies will face an increasing challenge as the fund grows, since more people will be covered under the pension program. Vice-Minister of MOHRSS Hu Xiaoyi said: “The focus of the next step is the supervision and security of the fund management tools.”

As a result of conflicting views among local governments agencies about who should make payments into funds for workers, transferring social security fund responsibility among different Provinces or Regions has been a long-standing problem.

Recognizing that the current geographic division of the social security system is a hindrance on social mobility, MOHRSS is intent on seeking a solution by fulfilling a mandate to allow urban migrants to transfer their shares.

“We have come up with two approaches. One is to draw partial cash from the fund or transfer the fund account; the other is to transfer documentary information and records,” said He Ping, director of the Social Security Academy of MOHRSS.

“The latter is difficult to implement because it requires a high level of computation and management. Currently the pension fund management organizations across the nation vary in their management and computational capacity,” he added.

It is expected that the former approach will be adopted in the new system.

“The percentage of a mutual fund that an individual will be allowed to transfer is still under review,” a source with the ministry said.

Although regional interests will be undermined as a result of such transfers, the plan has not yet considered establishing an independent fund to balance regional interests through structural adjustment.

Despite conflicting views on working out a social security system for migrant workers, a tailored system that balances the cost of hiring migrant workers with far greater mobility will serve their own best interests.

Currently, migrant workers pay eight percent of their wages into their individual accounts with employers contributing 10 percent, a mechanism that is flexible and convenient for workers who are apt to move from one place to another.

However, such a mechanism is interim. “The workers will eventually be integrated into the urban residents’ pension systems or countryside pension systems,” said a pension expert.

The proposed pension system for farmers anticipates that pension contributions will be paid jointly by the government, the farmer and the village.

The practice will be that the farmers and village both pay into farmers’ individual accounts, and central and local governments set up a pension pool to cover basic pension benefits. Under the rules, farmers should pay for at least 15 years to become eligible for pension benefits.

The program will be run in pilot areas for some time before it any general implementation across wider rural areas. Government officials predict that more than 500 million farmers will have joined by 2012.

If the three programs can be launched as scheduled, China’s social security system will cover 1.3 billion people across the nation.

(China.org.cn by He Shan October 5, 2008)