What does the wage replacement rate of the old-age social insurance system mean?

Pension replacement rate refers to the ratio of the pension level of workers when they retire to the wage income level before retirement. It is one of the basic indicators to measure the difference of living security level between workers before and after retirement. The specific value of pension replacement rate is usually obtained by dividing the average pension of new retirees by the average wage income of employees in that year. For example, in 2002, the average pension received by new retirees in a city was 650 yuan/month, and the average wage income of employees in that city was 1 100 yuan/month, so the pension replacement rate of retirees in this city in 2002 was (650 ÷1100) × 60. Because the basic old-age insurance system for employees of urban enterprises currently implemented in China is a system aimed at providing basic living security for retirees of urban enterprises. Therefore, the replacement rate of the basic pension target designed by this system is about 60%. In order to improve the living security level of retirees and make up for the shortage of basic pension replacement rate, the overall plan of China's urban workers' pension insurance system also designs the replacement rate of supplementary pension insurance (enterprise annuity) and personal savings pension.