The State is considering expanding a reformed pension insurance system nationwide at the end of this year after four years of trial in northeast China, according to an official from the related ministry.

Started in Liaoning Province in 2001 as an experiment, the new system aims to rectify the previous practice that mixes personal accounts with collected funds to form pension payments.

Instead, the personal account will be separated and left untouched until it is paid to the retiree, said Zhang Ran, an official with the Ministry of Labour and Social Security.

China did not have sufficient reserves when it adopted a pension insurance system in the 1990s. Many provinces were found to have transferred money from personal accounts to pay pensions, which resulted in a huge shortfall in funds.

The shortage was previously reported to be around 2,500 billion yuan (US$309 billion) nationwide.

Therefore, a three-year renovation was implemented in Liaoning in 2001, followed by Jilin and Heilongjiang provinces, also in northeast China, last year.

According to the new system, pensioners pay 8 percent of their total wages as their personal deposit into the fund, while the government and enterprises input a subsidy that amounts to 20 percent of the average local wage.

By the end of last year, Liaoning had enriched personal accounts with an accumulated fund of 13.8 billion yuan (US$1.7 billion). And Jilin and Heilongjiang have also seen similar substantial achievements.

Hu Xiaoyi, the ministry spokesman, said yesterday that the good experience from the three provinces will soon benefit the whole country.

The new pension insurance system will be implemented as an integral part of China's social security system, which also includes unemployment insurance under its umbrella, he said.

And the delivery of pensions will follow a new pattern that aims to reduce the risk from unexpected early retirement. "In Liaoning, pensioners who have paid into personal accounts for 15 years will earn 1 percent more annually if they continue to pay," Hu said.

The ministry said the country delivered pensions worth 252.9 billion yuan (US$31.2 billion) for the first nine months this year.

By the end of September, 171.2 million people had participated in the country's pension insurance system, an increase of 7.7 million over the end of last year.

(China Daily October 26, 2005)