Trial pension schemes were launched in the 1980s in the context
of a huge rural population just getting by on little money.
The rural population was ageing quickly because of family
planning programs and the large numbers of young people making a
break for urban areas in search of work.
Provision for the twilight years as guaranteed by land was
becoming increasingly unreliable because the proportion of farmers'
income reaped from the land was relatively small. Wages from
migrant workers accounted for the lion's share of a typical
family's earnings.
Rural families became less able to provide for the elderly
because fewer youngsters were around to care for them. In the past
men could guarantee a sort of pension by passing on family assets
to younger generations.
By the end of 2005, trial programs offering endowment insurance
to the elderly in rural regions had already registered substantial
progress. The pension's umbrella, which pooled more than 30 billion
yuan (US$3.7 billion), covered 54 million farmers in 1,800 counties
nationwide, and more than 2 million former farmers had begun to
draw money from the scheme.
Generally speaking, farmers that want to join the endowment
insurance scheme must first hand over a sum of money. This
constitutes the bulk of the pension fund.
On this basis, the townships and villages where they live give
them subsidies. The local governments also help by offering policy
and financial support to farmers.
Low-level governments in Beijing's suburbs and those in the
south of Jiangsu Province in East China have begun to contribute
financially to the endowment insurance scheme.
All of the money comes from individual bank accounts with
contributions from farmers, the township or village and the local
government.
The more cash one puts into the scheme, the more one can draw
when one is old enough to be eligible for the pension.
In Yantai, east China's
Shandong Province, 98 percent of farmers are covered by the
project.
When the pension program began each farmer put in just 30 yuan
(US$3.70) a year, but now hands over a few hundred yuan annually.
The total endowment insurance fund in the area has reached 1.6
billion yuan (US$197 million).
More than 100,000 old farmers have already begun to draw money
from the pool, each receiving 80 yuan (US$10) every month. As
staple foods are guaranteed by the land, this small sum is enough
to support their needs.
In Beijing, the municipal government has decided to earmark 50
million yuan (US$6.2 million) each year to finance the pension
scheme.
But these localities are all in economically developed
areas.
Huashan County of east China's
Anhui Province offers a case study for how relatively backward
areas are trying to find ways to support rural endowment insurance
projects.
The county government has decided to top up farmers' pensions by
2 percent.
It pays, in the eyes of farmers. They are happy to see the money
they pay into their bank accounts is fattened by interest and a
further 2 percent from the government.
In Hutubi County in the
Xinjiang Uygur Autonomous Region, farmers can get mortgage
loans from banks with receipts showing they have put money into a
pension fund.
Some critics doubt the feasibility of establishing rural
endowment insurance schemes.
They argue farmers are not eligible to enjoy pensions before
they give up farming.
This argument is unfounded because income from the land makes up
a tiny portion of total earnings.
In addition, farmers only have the right to use land it is owned
by the State. They cannot sell the land to provide for their old
age.
The conditions are right for the introduction of endowment
insurance schemes in rural areas now that agriculture makes up less
than 15 percent of GDP. It was at this stage of development that
European countries started providing pensions for farmers. Industry
has begun to offer substantial support for farming.
Implementation is also a pressing task as an old-age insurance
program would not be up and running for 20 or 30 years from the
time it is first set up.
China's elderly population crisis will peak in two or three
decades, so we must do something about it now.
Pension schemes should be incorporated into the nation's general
plans for economic and social development.
The government is trying to introduce a complete social security
system, but how will this be possible when large numbers of farmers
remain out of reach?
Governments at various levels should increase investment in
endowment insurance schemes in rural areas. Farmers should be
allowed to claim a share of the substantial increase in the
country's revenue.
In the immediate future, the focus should be on farmers employed
in sectors other than agriculture and those in areas that are
quickly becoming urbanized.
The 40 million or so farmers that have no land to till because
it has been requisitioned in the course of urbanization should be
given pensions.
Farmers-turned-workers in urban areas should also be included in
the endowment insurance plans.
The author is deputy director of the Rural Social Security
Department of the Ministry of Labour and Social Security.
(China Daily February 15, 2006)