Volksrepublik China | Max-Planck-Institut für Sozialrecht und Sozialpolitik - MPISOC
People's Republic of China

The Chinese Old Age Security System in 2020

By Yifei Wang, Max Planck Institute for Social Law and Social Policy

In the history of the People’s Republic of China, the expansion of the coverage of social protection and discussions on the responsibilities for the financing of social insurance have played a crucial role. The Chinese old age pension insurance system dates back to 1951 when the Labour Insurance Regulations were enacted. Back then, following the Soviet Union model, enterprises alone provided insurance contributions, and labour unions organised the labour insurance, including old age insurance. After the Cultural Revolution, the institutional structure of the labour insurance was destroyed and the payment of old age pension benefits became the responsibility of each enterprise at its own expense. Since 1980, many local governments have introduced public old age pension insurance schemes. Since 1986, local public pension funds have been built and contribution payments by both employers and employees have been introduced on a nationwide basis. As of today, financial protection in old age is organised differently for various population groups. For the majority of the population, a ‘standard’ level of protection is guaranteed by mandatory or voluntary insurance in public pension schemes, which have all implemented a financing strategy that combines resources of a so-called ‘social pooling fund’ with notional individual accounts following the recommendations of the World Bank. Specific groups of public sector employees enjoy the privilege of being mandatorily insured in a supplementary occupational pension scheme. If available, public pension benefits can be ‘topped up’ through voluntary enrolment in occupational and private pension plans. Outside the pension system, a ‘minimum’ income is provided through general social assistance measures.

Standard Protection in Old Age

For employees in enterprises, standard protection consists of mandatory insurance in a public pension scheme, the so called basic old age pension insurance scheme for employees  (职工基本养老保险). Persons in flexible employment1 can voluntarily participate in this scheme. The scheme was established in 1997 and became operational in 2005. Insurance contributions are partly transferred to a pay-as-you-go (PAYG) ‘social pooling fund’ and partly to capital-funded individual accounts. In case of budget deficiencies, the local governments provide subsidies to ensure the payment of benefits.

Access to the public old age pension insurance scheme of state authorities and public institutions  (机关事业单位养老保险) is restricted to a selective group of public employees working for state authorities and public institutions. Originally, those employees were covered by a separate public and fully tax-financed pension scheme that provided a comparatively high level of old age benefits. In 2015, the scheme was reformed into a mandatory insurance scheme that equals in its financing, administration, qualifying conditions and benefits the public pension scheme for enterprise employees. Persons insured in this scheme also benefit from supplementary mandatory insurance in a special (fully/partly) capital-funded occupational pension scheme, namely the occupational pension scheme of state authorities and public institutions  (机关事业单位职业年金), where contributions are jointly paid by employees and employers.

For a long time, persons not mandatorily insured in either of the two public schemes had no right to any old age pension benefit. Since 2009, some pilot programs for uninsured rural and urban residents have been launched and in 2014, the public basic old age pension insurance scheme for urban and rural residents (城乡居民基本养老保险) was established. Participation in the scheme is voluntary. The scheme is also open to workers in flexible employment who do not choose to enrol in the basic old age pension insurance scheme for employees. Insured persons receive a flat-rate, ‘basic pension’ from the tax-financed pooling fund and a ‘contributory pension’ from the capital-funded individual account. The scheme relies heavily on financial subsidies from the state and rural collective economic organisations. Overall, the level of benefits is very low – close to the level of the minimum living allowance.


The pension income can be topped up by voluntary participation in private pension plans provided by commercial insurance companies. The pilot program of personal tax-deferred commercial pension insurance  (个人税收递延型商业养老保险) was introduced in some cities (e.g. Shanghai, Xiamen, Suzhou) in 2018 providing some tax relief measures according to the EET Model2. A separate topping-up option exists for those insured in the basic old age pension insurance scheme for employees who can voluntary participate in the enterprise occupational pension scheme  (企业年金). Options for participation are provided to employees of a given enterprise based on collective agreements with insurance contributions being provided by the employer and the employees. The schemes are subsidised by some tax relief measures according to the EET model.


The means-tested social assistance scheme (社会救助)  falls outside the remit of the pension system and does not specifically target senior citizens but addresses other population groups as well. It provides a monthly minimum income through a minimum living allowance. In addition, the scheme offers further benefits addressing the basic living needs of persons in extreme poverty and by providing temporary and targeted one-time benefits for specific needs.

 1 According to the social insurance law of the People's Republic of China, persons in flexible employment (灵活就业人员) are self-employed person registered as ‘individual industrial and commercial households’ without employees, part time employees not participating in the scheme through their employers, and other persons in this catalogue.

2 According to the EET model, contribution payments, investment income and capital gains of the pension fund are tax-exempt, while pension benefits are taxed.

Full Report:
Schneider S. M., Petrova T., Becker U. (eds.), Pension Maps: Visualising the Institutional Structure of Old Age Security in Europe and Beyond, 2nd ed., Munich: MPISOC, 2021.

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