Why are pensions still rising when there is a huge gap in the pension fund?

China is in a rapidly aging society, with the population peak coming in seven or eight years, and the problem of elderly pensions will become more and more serious. According to the China Pension Actuarial Report 2019~2050 by the World Social Security Research Center of the Chinese Academy of Social Sciences, the national basic pension insurance fund for urban enterprise employees will exhaust its accumulated balance around 2035, and the current balance may reach a negative 11.28 trillion yuan in 2050, which is a very big pressure.In 2018~2019, China's basic pension insurance retirees increased by 512 million people, the total number of retirees reached 123.1 million, and the pension insurance fund expenditure reached 4.9228 trillion yuan. This year, in order to cope with the epidemic, China has promoted the preferential policy of reducing and exempting the portion of pension insurance premiums borne by enterprises, and it is expected that this year's pension insurance fund will definitely not be able to cover its expenses. However, in 2020, the country still requires retirees to continue to raise their basic pensions by 5%, and many elderly people's pensions have reached 3,000 or 4,000 yuan, greatly improving their living standards. Why would the state continue to push for pension increases at a time of great pressure?

First, the pension increase system, is determined by the Social Insurance Law, rather than the pension fund income and expenditure. According to the Social Insurance Law, the state establishes a normal adjustment mechanism for basic pensions, and adjusts the basic pensions of retirees at the right time according to the growth of social wages and price increases. According to the formula for calculating our pensions, the pensions of retirees in 2020 are all calculated using the average social wage in 2019.The average social wage across the country continued to grow by more than 8% to 10% in 2019, and for the sake of fairness, the pensions of retirees before 2020 should continue to be adjusted as well. In addition to this, in 2019, the national consumer price level increased by 2.7%, the price of various daily necessities is constantly growing, in order to protect the retirement, the living standard of the elderly pension adjustment has also become an important adjustment factor.

Secondly, the state treasury will ensure the continued operation of the pension insurance fund. The social insurance law also stipulates that government finances will subsidize the pension insurance fund when there is a shortfall in payments.In 2016, the accumulated balance of the pension insurance fund in Heilongjiang province was a negative 26.2 billion yuan, which was fully supported by financial subsidies.In 2017, governments at all levels subsidized the pension insurance fund by 800.4 billion yuan. From 1998 to 2019, the central government's subsidies to the basic pension insurance fund for enterprise employees have accumulated more than 4 trillion yuan, of which 526.1 billion yuan is scheduled for 2019. According to the 2020 fiscal budget, the amount of financial subsidies to the social security fund at all levels will be as high as 2.19 trillion yuan, so the state is a solid guarantee for the pension insurance fund.

Third, the state has a risk reserve fund.Since the establishment of the National Council of Social Security Funds (NCSSF) in 2000, the investment return is very good.In 2019, the social security fund equity investment return amounted to 291.718 billion yuan, with an investment return rate of 14.06%. The equity of the National Social Security Fund amounted to 2,137.651 billion yuan, with a cumulative net financial allocation of 959.582 billion yuan and a cumulative investment appreciation of 1,178.069 billion yuan.

Fourth, the country has a huge equity stake in state-owned assets.Starting in 2017, the country required that 10 percent of the equity stake in state-owned enterprises be transferred to the social security fund, and the amount of the transfer has now exceeded 1,000 billion yuan. The country has several trillion dollars of equity in state-owned enterprises, which is also enough to deal with various risky crises.

Fifth, the insured population can still be expanded. Many people overlook the fact that our national employment in 2019 was 774.71 million people, and the actual number of basic pension insurance participants was only 311.77 million, with a participation rate of just over 40 percent. As long as the publicity about the benefits of participation is continuously strengthened, more and more young people will participate in pension insurance and share the corresponding aging pressure.

China's economy has remained at a medium-to-high growth rate in recent years, and it is believed that this trend will not change much after the impact of the new crown epidemic is removed. Social progress and development, can bring us more pension support capacity, so China's pension system in recent years is still very strong support capacity, will not produce a crisis, which is why the country did not rush to promote the delayed retirement reasons.