Talking About the Future Development of Pension Insurance and Pension Model

  • Author: 土饭团
  • Translator: Ranting

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At a time when the forces of global justice are besieging the Chinese Communist Party, its demise is unstoppable. The future re-establishment of a pension system under the supervision of the New Federal State of China, based on the rule of law, which concerns the people’s livelihood, and solving the current problem of many elderly people in society not having any support, is one of the important things. In the issue of pension, pension insurance and pension model is the top priority, which is related to the money bag and quality of life of the elderly. I would like to state my personal view and vision for the future development of these two areas.

Pension insurance

Before talking about the development of pension insurance, let’s first look at the causes of China’s pension insurance problems. The popular pension insurance system in the world today is called the three-pillar model of pension. Basic pension insurance which is compulsory by law, corporate pensions, and commercial pension insurance. At present, the latter two account for a small proportion in China, and they only rely on basic pension insurance.

At present, China’s basic pension insurance has been running short for years, and financial subsidies have increased substantially. The second baby boomers are about to retire gradually, the birth rate continues to decline, and the newborn population is out of gear. The basic pension insurance model is a defined benefit model (DB), a pay-as-you-go system in which young people who work at the same time contribute to the pensioner. The sustainability of this model depends on the demographic structure. China’s population structure is currently in an inverted pyramid shape, with one young person supporting several elderly people. The fundamental reason lies in the CCP’s brutal family planning policy and the looting of most of the interests of the common people over the past few decades. Without money in their pockets, people cannot afford all kinds of living expenses and will not have the will to have children, the number of newborns will fall and the number of future contributors will be even smaller, a vicious circle.

Due to the poor market environment under the rule of the CCP, those participating in corporate pensions are basically large central and state-owned enterprises, with only 27 million participants by the end of 2020. Ordinary private enterprises have already been subjected to excessive taxation and are struggling to survive, so it is impractical to join corporate pensions. And according to the private will of independent investment in the class of commercial pension insurance is just starting, there are pension institutions, pension products frequently burst, no standard regulation of the situation, the elderly will only become unsupported.

After the elimination of the CCP, the situation of pension insurance development will become completely different. The first will certainly be a new political system and tax system based on the rule of law. After the current efficiency, transparency, standardization of the two, the unreasonable taxes such as the three public consumptions, public security expenditures (stability maintenance funds), invisible taxes, double taxation, and various “man-made taxes” of local taxation will be reduced to a minimum or will no longer exist. The people’s income will then increase significantly, wage growth lags behind GDP growth, the proportion of residents’ income to GDP has fallen for years inevitably reversed, the birth rate will naturally rebound by a certain percentage, and the pressure on basic pension insurance will be reduced accordingly.

Under the rule of law, corporate annuities can also develop successfully. Faced with the existing low birth rate and aging problems, it is an inevitable choice to learn from the internationally popular Defined Contribution (DC) model. The DC model is based on personal payment and does not depend on population. Under an economic environment, an efficient financial supervision mechanism, and a substantial reduction in business operating costs, and a fair competition mechanism between enterprises, the DC model can be realized. A fixed percentage of employees’ salaries and corporate subsidies are deposited into the annuity account, and the contribution percentage can be freely set within the limits of the law, and the money deposited into the account can be given tax deferral or exemption, so that both the enterprise and the employee can benefit. The company’s annuity account can make various investment combinations such as stock market, treasury bonds and funds for the purpose of preserving and increasing value.

For commercial pension insurance, it belongs to the voluntary participation of all citizens. What the government needs to do is policy support and efficient regulation of the market, for example, like the United States allows individuals to open various types of individual retirement accounts (IRAs), with tax-deferred savings and tax-free investment income. In addition, compared to the more stereotypical social security, commercial pension insurance tailored to individual needs will also be favored by many people, such as commercial insurance products with different years of service, products combining savings and investment, various accident and critical illness insurance. This is where market regulation becomes particularly important.

Once the development of corporate pensions and commercial pension insurance is on track, the rise of these two pillars will optimize the overall structure and reduce the burden of basic pension insurance. The three pillars of pensions can diversify risks and steadily operate and develop.

Having experienced a long agrarian society, the Chinese people focus on the concept of family culture. It is feasible to make support for the elderly a legal obligation, and the World Bank has proposed a similar concept, which is a concrete form of reflecting traditional Chinese culture and could become the fourth pillar of retirement in China. For example, it could provide that a proportionate share of the children’s income is used for alimony payments. Alimony is subject to an upper and lower limit, with tax rates divided into multiple brackets, combined with personal income tax, the actual income of the individual, a regressive tax or direct tax exemption to encourage more payments. Individuals or families whose total costs of supporting the elderly exceed a certain percentage of their income should receive a tax deduction. Set up appropriate institutions or organizations to monitor children’s support for the elderly, and those who do not meet the standards can have their credit scores deducted or be fined, with the fine being used for elderly support or to supplement the basic pension fund.

Globally, there are two key factors in countries with more successful pension system implementation. Tax incentives for individuals or employees to increase their long-term pension funds, and sound financial capital market regulation. Mobilizing the people’s enthusiasm for participating in pension insurance savings, so that the investment of individuals or institutions involved and the healthy development of the capital market (stocks, bonds, etc.) form a positive cycle, which is the fundamental reason for the long-term stable development of pension insurance.

Pension model

According to the current trend of China’s aging population, the large-scale development of the retirement industry is an inevitable trend in the future. Home care, community care and institutional care are the three mainstream models at present.

Home care, as the name implies, as their loved ones take care of them or take care of themselves. For Chinese people who have a strong sense of family, home care is currently the choice of most elderly people. Community care is based on home care, with community-related organizations working at home or caring for the elderly. Institutional care is commonly known as nursing homes. Under the perverse practices of the Chinese Communist Party for many years, many elderly people, including my grandparents, are now afraid to talk about the word nursing home. The words nursing home and unattended, abusive, and waiting to die can almost be equated.

In the future, based on the rule of law, attaching importance to the senior care industry, with macro planning first, and then under meso-micro support, more resources and functions will be added to these three senior care models, and there will be more connection and integration between the models, establishing a unified senior care service platform, and using big data to allocate and integrate resources to make up for the shortcomings of each.

For example, for the elderly living at home, the community property can develop elderly care services. The property has a better understanding of the surrounding geography and the owners, so that it is convenient to provide the elderly with various services such as clothing, food, transportation, housekeeping, and psychological consultation. The most worrying issue for the elderly is safety, and the establishment of an emergency call service for the elderly can help them in the event of an accident.

A reverse home mortgage is a viable option for seniors who demand a higher quality of life. As the name suggests, the homeowner mortgages the home to a bank, an insurance company, and after an appraisal, pays the borrower monthly or annually until his or her death. The extra fixed income can be used for spending, traveling, or redecorating your home to have a better environment for home care. The CCP has also borrowed this model from foreign countries and called it “housing for the elderly”, but the lack of supervision under the CCP system has turned it into a disaster for the elderly.

Communities can establish multiple senior living apartments on a street-by-street basis, based on the analysis of big data, integrating dining, medical and health services, recreation, and socialization. Day care, short-term, long-term residency, or rehabilitation and recuperation are available. The elderly usually do not like to be too far away from home and their familiar environment, and with the individual differences of each home-bound elderly person, it is necessary to build a community-centered senior living apartment to effectively make up for the disadvantages of home care.

Social volunteer “time savings” is also a good complementary model. A long-term social incentive for young people to take on the services of younger people by caring for them as they grow older, based on the time saved. Giving good assistance to the elderly who are aging at home and in the community. The reason why it is difficult to operate now is the lack of a scientific and reasonable certification standard. The solutions are not difficult, such as buying groceries for the elderly, talking with them, and taking care of them when they are sick. Weighting services of different intensities, with services of higher intensity receiving more time savings, can effectively advance this model.

Nursing homes are essential for elderly people who are unable to take care of themselves due to illness or various reasons and need professional care.

In addition to poor care and elder abuse in current nursing homes, there is a key problem, a lack of medical resources in nursing homes. In senior living, seniors will need specialized medical care for a period of time at one time or another. I believe that many families have encountered it. The elderly have been sent to nursing homes, and they have to wait in line to stay in the hospital ward. Because only the hospital has complete medical resources, and the medical insurance stipulates that they have to be transferred within 15 days. Time-consuming, labor-intensive, labor-intensive and financial.

The Chinese Communist Party has also proposed the “integration of health care”, and the results need no introduction. First of all, we need to look at this issue from the perspective of the characteristics of the whole elderly industry. It is a market consensus that the senior care industry is a marginally profitable industry. Take the nursing home, the initial investment is large, the investment recovery cycle is long, and generally need government financial support. However, under the CCP’s system, private capital does not receive government support in terms of financing, financial subsidies, land, medical resources, etc., and cannot participate in competition fairly. The low-profit pension industry will naturally not develop.

On the other hand, the CCP’s public institutions are inactive, just like the “integration of health care”, the policies are always only on words and paper, but not implemented. We all know that the profit of the elderly institutions is very thin, the public medical institutions will be interested in entering it.

The future senior care industry should be government-led and financially supported, coupled with market-based operations to allocate relevant medical resources in nursing homes, or to establish medical centers that counterpart nursing homes and provide medical services to retired seniors only. Including the community-established retirement apartments should also have a certain scale of medical resources, especially the provision of drugs for common chronic diseases of the elderly, these measures can be graded, saving the elderly and their families a lot of time and effort. Professional home care and health care services for homebound seniors, treating minor or chronic illnesses. Anyone who has experience in caring for the elderly knows that once a senior citizen has an accidental fall and fracture, or a sudden illness, and goes through a period of recovery from bed rest, their physical and mental condition can deteriorate greatly, affecting their quality of life and longevity. That’s why having a sound senior care system can maximize prevention and proper care for them.

We offer a variety of senior care options so that the elderly can be well taken care of and enjoy their twilight years. Elderly people who need long-term bed rest (stroke and paralysis, Alzheimer’s disease, etc.) need to be cared for in long-term care facilities with professional medical resources, and children should be more of a spiritual companion and financial support, which is a qualified government’s obligation to every taxpayer. I believe that after the eradication of the CCP, with the leadership of the New Federal State of China and the establishment of an excellent pension system based on the rule of law, and based on the Chinese nation’s cultural tradition of hard work and frugality, and emphasis on kinship, this day will not be long in coming.

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