Pension Reform in Rural China and Rural Latin America: The Lessons Go in Both Directions

• In Event: 067 - Section on Aging and the Life Course Refereed Roundtable Session
  In Refereed Roundtable 100min: Table 09. Life Course Perspectives on Care, Well-Being, and Resources in China

Abstract

Over the last five years, China has made substantial progress in developing its New Rural Pension System (NRPS), which combines a voluntary funded defined contribution (FDC) pillar with contingent social pensions (SP). The primary goal of this article is to provide a critical review of what has been achieved in China, current challenges facing NRPS, and future reform options. We consider related pension experience in other countries, particularly in Latin America. A major achievement of NRPS has been rapid extension in coverage to all rural counties and hundreds of millions of rural residents. This expansion has been getting a great deal of international attention, particularly as a potential model for rural populations in other developing countries. However, it is also starting to become clear that NRPS is facing challenges, particularly with respect to future incentives for participation among younger workers, benefit adequacy, and financial sustainability. Because combining a voluntary FDC with a contingent SP pillar may not be enough to successfully address these challenges, we discuss the strengths, weaknesses, and feasibility of expanding the number of participants and generosity of the SP pillar, switching to a matching defined contribution (MDC) scheme, and possibly exploring a novel notional matching defined contribution scheme (NMDC).

Author

• John B. Williamson, Boston College