On November 10, 2019, the Social Security Actuarial Research Center held the “Social Security Actuarial Workshop and Actuarial Report Press Conference” at the Central University of Finance and Economics (CUFE). The event comprised of three segments: "Leadership's Speech", "Actuarial Report Release" and "Actuarial-based Social Security Workshop". Representatives from relevant government agencies and scientific research institutions such as the Social Security Department of the Ministry of Finance, the General Department of the Ministry of Finance, the Endowment Insurance Department of the Ministry of Human Resources and Social Security, Renmin University, Tsinghua University, Peking University, the Chinese Academy of Social Sciences and so on participated this event and conducted an in-depth discussions and exchanges on actuarial related social security issues.
Group photo of selected participants
The Leadership's Speech segment, which was chaired by Professor Guijun Li, Director of the Academic Affairs Department of CUFE (former Director of the Scientific Research Department), involved speeches given by Professor Xiaolin Li, Dean of School of Insurance of CUFE, Xiaoqiang Luo, the Level 2 Inspector of the General Department of the Ministry of Finance, Donghui Di, the Level 2 Inspector of the Social Security Department of the Ministry of Finance, and Kai Liu, the Level 2 Investigator of the Endowment Insurance Department of the Ministry of Human Resources and Social Security.
Chaired by Professor Guijun Li
The speech by Dean Xiaolin Li first thanked those guests who attended the meeting and sent regrets to those experts and scholars who could not participate the meeting. Dean Li also expressed his appreciation for the strong supports on the social security actuarial projects provided by the relevant government agencies, including the Ministry of Finance and the Ministry of Human Resources and Social Security. He pointed out that the funding of social security program actually relates to the problem of partitioning the social wealth, and is something we need to work together. With the support and guidance of experts and leaders, the China Institute for Actuarial Science and School of Insurance at CUFE will work collaboratively to improve the relevant system.
Speech by Dean Xiaolin Li
Director Xiaoqiang Luo expounded a method for macroscopically measuring the impact of the aging population on the employee pension’s funding budget. The aging population will affect the dependency ratio, which in turn will affect the funding balance of enterprise employee pension insurance. He simplified the original process of measuring the balance of payments. From a macro perspective, he proposed to mainly calculate premium income and pension payments and introduced premium self-sufficiency rate and gap rate. By simplifying and grasping the main contradictions, the biggest advantage is to minimize the dependence on economic forecasting, which is an important source of error. At the same time, Director Luo said that there are many variables affecting the funding balance of employee pension insurance and we need further improvement on the macro measuring method.
Speech by Director Xiaoqiang Luo
Director Donghui Di pointed out: the central document of the Third Plenary Session of the 18th Party Congress proposed that pension insurance should adhere to actuarial standards. The outline of the 13th Five-Year Plan once again emphasized the improvement of the social insurance system and insisting on the balance analysis that is actuarially sound. Since the reform and opening up, the social security reform was formally launched in the mid-1980s, which was mainly divided into three phases: The first stage was mainly associated with the reform of state-owned enterprises. From the mid-1980s to around the 16th National Congress of the CPC, the social security reform was mainly used as a supporting measure for the reform of state-owned enterprises. It obeyed and served the reform of state-owned enterprises. The second phase, which continued from the 16th National Congress to around the 18th National Congress, was the stage of comprehensive development of the social security system. It basically improved the entire social security system and promoted full coverage. In recent years, the social security is undergoing an important transition period. In the third stage, more emphasis is placed on the sustainable and high-quality development of the system. Due to the increasingly serious problem of population aging and some deep-rooted system and mechanism problems of the social security system itself, the future unsustainable risk of the system still exists. Actuarial-based social security is essential in order to adapt to the adverse impact triggered by the population, economy, society and ensure sustainable development in the medium and long term by improving the fairness of the system and enhancing the flexibility of the system. We should improve the social security system in line with China's national conditions, formalize the actuarial assessment and periodic reports of pension insurance, timely monitoring operational risks, improve the construction of basic databases, and amplify universities’ function and contribution in actuarial related social insurance aspects.
Speech by Director Donghui Di
Director Kai Liu pointed out the origin problems of social security include limited participants, actuarial tools’ complexity, low public awareness of social insurance. With the continual enrichment of scientific research and adherence to the actuarial balance into the 13th Five-Year Plan, the actuarial-based social security is gaining popularity, with its principles deeply rooted among us. At present, the China's enterprise employees pension insurance is, in general, running smoothly, with current incoming income exceeding outgoing expenses. The pension fund balance is still increasing, with strong protection capabilities and reaching 4.78 trillion yuan by the end of 2018. However, the operation of the enterprise employee pension insurance system still faces many challenges. In the short term, the main challenge is the imbalance of the pension burden between regions and the contradictions within the structural system. In the long run, the main challenge is attributing to population aging. We should raise the overall level of planning, expand investment channels, develop a multi-tier pension insurance system and leading to a healthy and sustainable development of the pension insurance system.
Speech by Director Kai Liu
The second segment of the event,which is still chaired by Professor Guijun Li, was the release of the "Actuarial Report on the Basic Old-age Insurance for Chinese Enterprise Employees". The speeches were given by Professor Zaigui, principal investigator of the actuarial report and Director of the Social Security Actuarial Research Center at CIAS, doctorate student Xiaohua Chen and Associate Professor Liao Pu. They respectively introduced the actuarial principles and fundamentals, actuarial modeling and calibration, as well as actuarial results and comparison.
Professor Zaigui Yang expounded the actuarial ideas, methods and models of the basic old-age insurance for enterprise employees. Participants in this scheme are divided into "old people", "middle people" and "new people". By separating the incumbent insured and the retirees according to years, the report establishes actuarial model of pooled account balance, actuarial model of personal account balance, actuarial model of current and accumulated balance based on the parallelogram framework for quantifying pensions.
Xiaohua Chen, a doctoral student, expounded on the actuarial calibration methods. The actuarial basis includes three categories: population parameters, economic and social development-related parameters, and enterprise employee basic old-age insurance parameters. He provided details on the calibrating parameters in these three categories. Additionally, he put forward the idea of improving the estimation methods.
Associate Professor Pu Liao reported the actuarial results and comparison. The income and expenditure of old-age insurance both indicated "east region > central region > west region" ranking. The main factors affecting regional old-age insurance’s average income and average expenditure are the population size, the new entrants’ salary, the proportion of premium contribution relative to the statistical average wage, wage growth rate, working age and wage growth rate, pension growth rate, pension replacement rate, pension growth rate with age. Among them, population and wages are the two most important and significant factors that affect the income and expenditure of old-age insurance. He further stated the impact of the pension fund's central transfer system on the provinces' revenue and expenditure balances. He also shared his view on the transfer of external assets, family planning policy and basic old-age insurance system reform.
The third segment, "Social Security Actuarial Workshop" was chaired by Professor Zaigui Yang. The speakers include Professor Xiaojun Wang, Dean of the Statistics Institute of Renmin University, Professor Bingzheng Chen, Director of the China Insurance and Risk Management Research Center of Tsinghua University, Professor Wei Zheng, Director of the Department of Insurance, School of Economics, Peking University, and Lianquan Fang, Secretary-General of the World Social Security Research Center of the Chinese Academy of Social Sciences.
Professor Xiaojun Wang mainly elaborated some issues that should be paid attention to in evaluating social security. She pointed out that the results of social security assessments are deeply affected by the assessment model, actuarial assumptions and related data, of which the last two have the greatest impact. When making assumptions about factors that affect the population structure of each province, such as fertility rate, migration rate, life expectancy, etc., the consistency between them needs to be considered. When calculating the income and expenditure of the provincial basic old-age insurance fund, one difficulty is to measure the population migration of each province. She believed that when doing sensitivity analysis, we can consider the relationship between the various factors of the model and try to change multiple factors at the same time for a comprehensive impact analysis. The adjustment index of pension relative wages is more sensitive than other factors. At the same time, she pointed out that the effect of delayed retirement on increasing pension insurance contribution income and reducing pension benefits will be partially offset by the gradual extension of the average life expectancy of the population.
Speech by Professor Xiaojun Wang
Professor Bingzheng Chen focused on the theme of whether the social basic pension insurance plan faces longevity risks. Firstly, he believed that the concept of longevity risk is not equivalent to the population aging and he asserted that longevity risk is a more appropriate term. Secondly, he emphasized on three important issues: whether the social basic endowment insurance plan faces longevity risk, how to quantify and how to manage it. Finally, he put forward some measures to deal with longevity risks, including delaying retirement, establishing a mechanism to dynamically adjust the payment standard in response to longer average life expectancy, and establishing long-term reserves to deal with longevity risks, and so on.
Speech by Professor Bingzheng Chen
Professor Wei Zheng mainly discussed four views on actuarial aspects of social security. First, the current consensus in the field of actuarial-based social security needs to be further strengthened. Second, some assumptions in actuarial-based social security are difficult to set, such as GDP growth rate and investment return rate etc. Assumptions about the retirement age of employees and the contribution rate of enterprises can be closer to reality. Third, even if the system ’s historical debt and the hidden debt of personal accounts brought about by the transition are solved, the basic old-age insurance system itself is still actuarially unbalanced and must rely on financial subsidies. Fourth, in the long-term forecasting, on the one hand, it is necessary to consider from the actuarial perspective, and on the other hand, from the economic perspective, the relationship between the variables should be considered under the general equilibrium framework. For example, the transfer of state-owned assets to social security funds will affect both social security funds and human capital, labor supply, and public finance spending in other areas.
Speech by ProfessorWei Zheng
Researcher Lianquan Fang explained the urgency of the current social security reform from the perspective of pension actuarial results. Combining the results disclosed in the pension actuarial report released by the World Social Security Research Center of the Chinese Academy of Social Sciences, he focused on the role of the central transfer pension system, the transfer of state-owned assets and the increase of financial subsidies to improve the pension gap. He pointed out that China's basic old-age insurance system faces sustainable financial challenges in the medium and long term. The current reform of social security fee reduction further aggravates the financial challenges. Therefore, the reform of the basic old-age insurance system must address both its symptoms and root causes, starting from the origin of the system and parameter reform. The recommended comprehensive design plan must ensure financial sustainability of the system as well as recognizes that its sustainability fundamentally relies on the social security system reform.
Speech by Researcher Lianquan Fang
The conference participants received a complimentary copy of the "Actuarial Report on Basic Old-age Insurance for Chinese Employees”. The actuarial design of the social old-age insurance system provides a strong scientific basis and is a most convincing tool. The Third Plenary Session of the Eighteenth Party Committee proposed adherence to the basic old-age insurance system combining social pooling and individual accounts, and adhere to the principle of actuarial balance. Professor Zaigui Yang said that in the face of the historical mission of providing social old-age insurance to the country, the China Institute for Actuarial Science is duty-bound. The actuarial report has 9 chapters, showing the actuarial results of basic old-age insurance income, expenditure and balance of enterprise employees in the nationwide and 31 provinces from 2019 to 2068. The first chapter provides an overview of actuarial principles and actuarial models. Each subsequent chapter presents an actuarial report for a geographical region. The final chapter summarizes and compares the actuarial results. The purpose of the budget forecast is to provide a scientific basis for improving the basic old-age insurance system and to ensure its healthy and sustainable development. The report can be used not only as an actuarial guide for studying social old-age insurance, but also as a reference for improving China's social old-age insurance system.
Report site
At the workshop, Professor Zaigui Yang, on behalf of the actuarial report research team, thanked the Ministry of Finance and the Ministry of Human Resources and Social Sciences for trusting the Social Security Actuarial Research Center of the China Institute for Actuarial Science, Central University of Finance and Economics. They entrusted the center to study critical and timely issues related to people ’s livelihood. Thanked the Research Office of the Central University of Finance and Economics for supporting the Social Security Actuarial Research Center. Thanked the China Institute for Actuarial Science for their uncompromised support to the Social Security Actuarial Research Center. Thanked the research team members for their cooperation and the China Labor and Social Security Publishing House for sponsoring the publication. More than 100 participants from politics, industry, learning and research (including attendees who rushed from South China to Beijing) have attended the workshop. While the duration of the workshop was short, it was very constructive and informative. The participants had benefited significantly.
The event was funded by the Key Research Base of the Humanities and Social Sciences of the Ministry of Education and the Innovation and Intelligence Base (B17050) of the “Insurance Risk Analysis and Decision Making” of the Central University of Finance and Economics.
