Retirement age should be raised gradually

Due to China's complex national conditions and differences in public opinion, the retirement age should not be raised in one stroke across all sectors. Raising the retirement age, say, from 60 to 65 years, should be a gradual process taking into account the differences between various groups and individual choices. Plus, its aim should be to achieve Pareto efficiency, which means increasing the target group's interests without undermining those of others. After all, in a country of more than 1.3 billion people, implementing any public-related policy at one go is fraught with dangers.

A flexible retirement policy suits China's real conditions. Raising the retirement age is indeed necessary, respecting personal choice is necessary too. The old-age pension system should encourage and guide people to choose their retirement age, which will ultimately lead to a win-win situation for employers, employees and the pension system.

To be specific, the retirement age should be raised slightly, perhaps to 62 years at first, to cope with the challenges faced by the pension system. If employees want to work longer, the authorities could partly waive their old-age insurance premium. And when a person finally retires, the pension should be in accordance with the number of years he/she has worked (people who work longer get higher pensions).

Such a system faces two major challenges. The first concerns the sustainability of social insurance funds. And the second is related to actuaries of old-age insurance, including management of individual accounts, which requires high technology and authorities' determination to propel reforms.

Since the retirement policy concerns the long-term interests of the public, we should consider its factors and possibilities with utmost care before implementing it.

The author is a professor of the School of Public Affairs, Xiamen University.