There is a saying now called "Good work is not as good as early insurance participation." For instance, some elderly people who started working at the age of sixteen or seventeen tend to receive higher pension levels compared to some retirees with higher salaries and shorter contribution periods.

Why does the saying "Good work is not as good as early insurance participation" exist?

The establishment of the basic pension insurance system for enterprise employees in our country began in October 1986 and was fully implemented in 1992. Later, the system went through the establishment of individual pension accounts and full implementation, and the pension payment method was perfected in 2005. In October 2014, the pension insurance system reform was implemented for government institutions and public sector organizations. The process is quite complex.

For the elderly who retired after starting work at the age of sixteen or seventeen, an important part of their pension treatment is the transitional pension. The transitional pension serves as a compensation for the absence of individual pension accounts and also covers the absence of enterprise annuities and occupational annuities. The transitional pension is linked to the average social wage, hence the treatment is quite favorable.

The current pension insurance system operates on the principle of "more contributions, more benefits" and "longer contributions, more benefits." Without knowing the contribution level, the length of the contribution period is the most important data for measuring pensions. Especially in the pension adjustment after retirement, the contribution period is also the most important factor for pension increases.

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Therefore, it is quite common that people with longer contribution periods receive higher pensions.

Which is more important in the pension system: contribution period or contribution base?

The current pension calculation formula generated by insurance participation mainly includes two parts: the basic pension and the individual account pension.To test which is more important, the number of years of contribution or the contribution base, we assume that the average social salary remains unchanged. Let's compare the pension at the age of 60 for someone who starts paying into the pension fund at 16 with a 44-year contribution period and at a 60% tier, versus someone who starts at 25 with a 35-year contribution period and at a 100% tier. What would be the difference in their pension?

Currently, the average social salary across various regions generally ranges from 6,000 to 12,000 yuan, with Shanghai having the highest at 12,307 yuan. For simplicity, let's assume the average social salary is 10,000 yuan, and the same figure is used for pension calculation.

① Basic pension = Average social salary of the year prior to retirement × (1 + the individual's average contribution index) ÷ 2 × number of contribution years × 1%.

According to the contribution at 60% and 100% tiers, the average contribution index is 0.6 and 1, respectively.

With contribution periods of 44 years and 35 years, according to the calculation formula, they can receive 35.2% and 35% of the average social salary of the year prior to retirement, respectively.

With an average social salary of 10,000 yuan, they can receive 3,520 yuan and 3,500 yuan, respectively. Indeed, with 44 years of contribution, the basic pension benefit is higher.

② Personal account pension is equal to the balance of the individual's pension insurance account ÷ the number of months for pension payment at the age of 60 (139 months).

Contributing at a base of 6,000 yuan, 480 yuan goes into the personal account each month, accumulating 5,760 yuan per year, and the total accumulated amount over 44 years is 253,440 yuan. At the age of 60, the monthly personal account pension is 1,823 yuan.

If contributing at a base of 10,000 yuan, 800 yuan goes into the personal account each month, accumulating 9,600 yuan per year, and the total accumulated amount over 35 years is 336,000 yuan. In this case, the monthly personal account pension is 2,417 yuan.Based on the data provided, the combined total of basic pension and personal account pension amounts to 5,343 yuan and 5,917 yuan, respectively.

Overall, the principle of "more contributions, more benefits" in the pension insurance system is effective. However, for individuals with the same contribution base, it is certain that a longer contribution period will result in a higher pension.

If conditions permit, it is advised to participate in the pension insurance scheme as early as possible. This is especially recommended for those who have already signed employment agreements, labor contracts, or are already insured, as the graduation year does not affect the status of fresh graduates in provinces such as Shandong and Guizhou, which have issued clear regulations on this matter.

Participating early in the pension insurance system is better for accumulating future pension funds. #Pension#