Annuities Suggested as Part of Pension Reform in China
China's pension system is in need of reform.
The current pay-as-you-go system only covers 30 percent of the population and is funded by a 28 percent payroll tax on participating companies.
The remainder of the system is unfunded with liabilities that total almost 140 percent of China's current GDP.
Boston University Professor Laurence Kotlikoff provides an interesting set of remedies in a recent op-ed piece.
Included in Kotlikoff's set recommendations is the notion of mandatory, state-administered annuitization beginning at age 57. The assets of all pension system participants would be gradually sold-off and used to purchase shares in a longevity-based mutual insurance fund.
The annuities would start paying-out at age 62, and at age 67 each worker would receive the annuity in full.
Source: China Daily
