The government has encouraged more companies to follow the
Lenovo Group in introducing additional pension schemes.
On Wednesday computer giant Lenovo announced an additional
pension program, to ensure its China-based employees quality of
life throughout their retirements.
Lenovo is the first Chinese company to register its corporate
pension program, approved by the Ministry of Labor and Social
Security.
Together with the social pension insurance required by the
government, the voluntary corporate pension scheme, known as
enterprise annuity, will increase benefits to working people after
retirement.
"We are very proud to be among the first to offer retirement
benefits to our employees in China," said Ezra Singer, Lenovo Vice
President of Compensation and Benefits.
Chen Liang, the ministry's Fund Supervision Department director,
said the additional welfare offered by the companies should become
an essential part of China's pension system, offering a better life
for the nation's increasing number of retirees.
"We will design more incentives to encourage companies to follow
suit," said Chen. "The money the companies spend on pensions should
be tax-free."
However Chen said tax policies in various regions in China are
different, presenting a barrier to spreading the availability of
corporate pensions.
Lenovo said about 70 percent of its Chinese employees have
applied to join the pension program and the company and employees
will equally share the payments into the pension account.
According to its program plan, Lenovo employees' pensions will
be tripled after they retire.
Before the program, for example, an average retiree could
receive a 1,300 yuan (US$160) monthly pension, while an average
employee could earn 6,000 yuan (US$750) per month.
After the pension program is implemented the same retiree could
receive up to 3,600 yuan (US$450) per month, or 60 percent of their
previous salary.
Lenovo has selected corporate pension service providers Ping An
Endowment Insurance Company, China Merchants Bank and Harvest Fund
Management Company Ltd to serve as trustee, custodian and
investment manager, respectively, of the new scheme.
Liu Junsheng, a researcher with the Labor-Wage Institute under
the Ministry of Labor and Social Security told China Daily
the new pension schemes could greatly improve retirees' quality of
life, if they are implemented nationwide.
Liu is concerned that retirees in China currently receive
relatively low pensions compared with those still in work.
Statistics indicate the average pension is currently only 20
percent of the average employee's wage. In developed countries it
is between 40 and 60 percent of the average wage.
"If the rate continues to be this low, retired people will not
be able to improve their lives," said Liu. "New measures are
urgently needed as China is an aging country."
He said China's population is growing older at an ever-faster
pace and more than half-a-billion rural and urban workers don't
participate in state-run social security schemes.
And China's implicit pension debt could climb to as much as 9.15
trillion yuan (US$1.14 trillion) during 2001-75, according to the
World Bank.
"All the facts indicate the urgency for us and companies to save
and invest for retirement," said Liu.
(China Daily July 7, 2006)