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1st LD-Writethru-China Focus: China unveils unified pension system

Xinhua, January 15, 2015 Adjust font size:

Measures on old-age insurance for workers in government agencies and public institutions were unveiled on Wednesday.

Insurance will now be paid by both workers and organizations, instead of just by organizations or central finance as in the past. Workers will pay 8 percent of their monthly salary into the scheme, while the organization will pay 20 percent of the salary, according to a statement by the Ministry of Human Resources and Social Security.

China has nearly 40 million such workers in government agencies and public institutions. Most of them are civil servants, doctors, teachers and researchers.

In the past, corporate employees had to pay for their own old-age insurance, while government staff enjoyed pensions without making any contribution at all.

China introduced the pension system in 1955 and it started to diverge in the early 1980s as three decades of planned economy ended. Businesses were allowed to assume sole responsibility for their profits and losses and gradually developed their own old-age insurance requiring both employees and employers to contribute. The previous pension scheme remained for public employees and dual systems came into being.

Pensions without worker contributions have become a huge burden on the government and are unsustainable. The dual system also hindered free flow of staff between private and public agencies. In addition, public outcry about the inequity has been mounting.

The unification will help create a fair environment for people in different walks of life, said the ministry statement.

Government staff have so-called "iron bowls": They can not be fired at will as private employees can. The ministry said the new system will allow government agencies and public institutions to hire and fire workers just as enterprises do. Endi