Population Ageing and the Financial Sustainability of Social Pension System in China

As a result of globe population ageing and economic growth slowing, the public pension system worldwide is facing significant financial unsustainable challenge and has to be reformed. In China, Social Insurance Act implemented in 2011 has the requirement of financial sustainability for social pension system, but there are no financial risk management system in practice and relative theoretical study on it. In this paper, we discuss the concept of financial sustainability of social pension system and the method to measure it, and then build a long term actuarial model to evaluate the financial income, outgo and balance. The result is that, current system has serious financial solvency problem in the long term. Increase retirement age and cut the benefit will help to recover financial balance but need to develop multi-pillar system to provide adequate pension benefit.