China, People's Republic of: Study on the Sustainable Development of Urban Pension Insurance

Sovereign Project | 47043-001 Status: Approved

Summary

The PRC Country Partnership and Strategy 2011 2015 identified inclusive growth, i.e., balanced and equitable development, as one of the three pillars. Rapid aging of the population is a major constraint for the PRC to attain inclusive growth. A pension system is a key to provide economic protection for the elders. In addition, it needs to maintain sustainability of the pension system in order to minimize the negative impact of population aging on the development and realize inclusive growth in the PRC. The purpose of the proposed technical assistance (TA) is to provide the Ministry of Human Resources and Social Security (MOHRSS) with recommendations for strengthening sustainability of the urban pension system.

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Project Name Study on the Sustainable Development of Urban Pension Insurance
Project Number 47043-001
Country China, People's Republic of
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8463-PRC: Study on the Sustainable Development of Urban Pension Insurance
Technical Assistance Special Fund US$ 400,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Sector / Subsector

Finance - Insurance and contractual savings

Gender Equity and Mainstreaming
Description

The PRC Country Partnership and Strategy 2011 2015 identified inclusive growth, i.e., balanced and equitable development, as one of the three pillars. Rapid aging of the population is a major constraint for the PRC to attain inclusive growth. A pension system is a key to provide economic protection for the elders. In addition, it needs to maintain sustainability of the pension system in order to minimize the negative impact of population aging on the development and realize inclusive growth in the PRC. The purpose of the proposed technical assistance (TA) is to provide the Ministry of Human Resources and Social Security (MOHRSS) with recommendations for strengthening sustainability of the urban pension system.

The proposed TA is the continuation of ADB's support for pension reforms in the PRC since the mid-1990s. ADB's support has particularly contributed to the expansion of the rural pension system and improvement in its administration. The proposed TA provides further assistance for MOHRSS in strengthening the sustainability of the urban pension system.

In order to strengthen sustainability of the urban pension system in the PRC, there is a need to examine (i) the adequate retirement age, (ii) the adequate set of required duration of contribution payment and the level of contribution and benefit, (iii) disincentives for early retirement, and (iv) pension liabilities and the scale of the provincial and NSSF assets. The pension liabilities need to be examined for the PAYG scheme and the unfunded part of individual accounts.

Project Rationale and Linkage to Country/Regional Strategy
Impact Improved sustainability of urban pension system while ensuring adequate benefits

Project Outcome

Description of Outcome Recommendations for strengthening sustainability of the urban pension system in the PRC
Progress Toward Outcome

The potential policy options based on pension liability projection will be discussed at the interim workshop in late 2015 or early 2016.

The pension liability project model examines 6 scenarios on raising pensionable age. The interim workshop was held in Beijing in March 2016. The results of the liability projections and other draft outputs were discussed at the interim workshop.

The final workshop is planned to be held at the end of August 2016. The projections will be re-reviewed, and refined if needed, by the workshop.

After the final workshop, all project reports will be finalized.

Implementation Progress
Description of Project Outputs

Analysis of the urban pension system

Analysis of international practice on pension reforms including review of other organizations' contributions

Projection of pension liabilities and the NSSF asset level

Knowledge product summarizing key policy lessons and advice on pension sustainability

Enhancement of capacity development for relevant government officials

Status of Implementation Progress (Outputs, Activities, and Issues)

The inception meeting was held in Beijing on 3-4 March 2014.

At the inception meeting, detailes of technical reports and time line for all activities has been discussed and agreed:

- Completed inception report will be submitted to the EA and ADB in April 2014

- Sample survey to investigate public opinion on potential pension reforms will be conducted in August 2014

- 1st draft of pension liabilities projection will be prepared by the end of August 2014

- 1st draft of technical reports will be prepared by the end of October 2014

- An interim workshop will be organized in 2nd half of November 2014

- A draft final report will be submitted to the EA and ADB in April 2014

- A final workshop is planned to be organized in May 2014.

Sample survey of public opinion will be conducted in three provinces.

As of September 2014:

The review mission was conducted on 2 September 2014. The EA and ADB discussed and agreed that a pension liability model needs to be updated and tailored to project pension liabilities based on policy scenarios to be produced by the TA. Since these adjustments would take more time than expected, the schedule of draft reports and an interim workshop has been revised as follows:

- The draft reports will be submitted to the EA and ADB by 31 October 2014.

- The liability projection programming will be completed by January 2015.

- An interim workshop will be held in March 2015.

As of March 2015:

- The projection model has been discussed among the experts and revised.

- Based on the revised model, the base line has been estimated (1st run).

- The 1st run of the base line estimation is under discussion among the team members.

- After the completion of the base line estimation, the policy options will be discussed and completed by incorporating the comments of the EA and ADB.

As of September 2015

- Review mission was conducted in August 2015. The agenda was the projection model and baseline projection. A draft baseline projections have been revised and all participants discussed the assumptions of the revised baseline projections and the projection model. In addition, potential policy options for increasing pensionable age were also discussed. Based on the confirmed projection model, pension liabilitiy for each potential policy option will be estimated.

- Based on the discussion at the review mission, the international and national pension liability specialists will confirm the baseline and projection model.

- Based on the confirmed baseline and projection model, the national expert will estimate the pension liability for each of the policy options to raise pensionable age.

- After those draft estimations are prepard, an interim workshop will be held to discuss the potential policy options and the estimation results. The interm workshop is expected to be held in late 2015 or early 2016.

As of March 2016:

- The interim workshop was held in Beijing in March 2016.

- The draft results of the liability projection were discussed at the interim workshop. The projection examines 6 scenarios on raising pensionable age.

- Other draft reports were also presented and discussed at the interim workshop.

- The project team will re-review the liability projections with an attention to the assumptions made for the baseline model.

- The final workshop is planned to be organized at the end of August 2016. All revised reports and results of the projection will be discussed at the final workshop.

- After the final workshop, all reports will be finalized by incorporating comments received at the final workshop.

- The project will be completed as planned in October 2016.

Geographical Location

Summary of Environmental and Social Aspects

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation

The government (the EA)'s view on the issue of pension sustainability has been consulted during an inception meeting and a review mission. The EA stressed the importance of presenting policy scenarios on this issue with projection of pension liability. Based on the projection of pension liabilities, potential policy options will be discussed with the EA at the interim workshop.

as of Sept 2015:

- During the review mission, the focal policy area of the EA was re-confirmed; that is, potential increase in pensionable age. The pension liability based on the policy options (incerase pensionable age) will be examined by the confirmed projection model.

The estimation results will be discussed among the EA, relevant govt institutions, and experts at the interim workshop.

as of March 2016:

- Relevant officials from Ministry of Human Resources and Social Security participated in the interim workshop, held in March 2016.

- All participants actively provided comments on the presentations and draft project findings, which presentec the strong interests of officials on the focal issue of this project.

Business Opportunities

Consulting Services The consultants will be engaged as individual consultants by ADB in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time). The proceeds of the TA will be disbursed in accordance with Technical Assistance Disbursement Handbook (2010, as amended from time to time). All procurement will be done in accordance with ADB's Procurement Guidelines (2010, as amended from time to time).

Responsible Staff

Responsible ADB Officer Hiroko Shiroishi
Responsible ADB Department East Asia Department
Responsible ADB Division Public Mgt, Financial Sector and Regional Coop Division, EARD
Executing Agencies
Ministry of Human Resources and Social Security
Department of International Cooperation
12 Hepingli Zhongjie, Beijing
People's Republic of China

Timetable

Concept Clearance 21 Jun 2013
Fact Finding 23 Jul 2013 to 24 Jul 2013
MRM -
Approval 25 Sep 2013
Last Review Mission -
Last PDS Update 30 Mar 2016

TA 8463-PRC

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
25 Sep 2013 18 Nov 2013 18 Nov 2013 20 Oct 2015 20 Oct 2016 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
400,000.00 0.00 30,000.00 0.00 0.00 0.00 430,000.00 25 Sep 2013 118,078.68
Title Document Type Document Date
Study on the Sustainable Development of Urban Pension Insurance Technical Assistance Reports Sep 2013

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

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