How to calculate the average contribution index of pensions is a question that many elderly people approaching retirement or already retired may want to understand.

The average contribution index is an important factor in calculating pensions. It is clearly reflected in the basic pension:

Basic pension = the social average wage of the year before retirement × (1 + the individual's average contribution index) ÷ 2 × contribution years × 1%.

The average contribution index generally ranges from 0.6 to 3. If it is 0.6, for each year of contribution, one can receive 0.8% of the social average wage of the year before retirement. However, if it is 3, for each year of contribution, one can receive 2% of the social average wage of the year before retirement.

How exactly is the average contribution index calculated? We need to understand the following four aspects:

First, the individual's contribution base for each year. The contribution base is an important factor for people to participate in insurance, and our payment amount is calculated based on this.

For example, self-employed individuals pay at a rate of 20%. If the contribution base is 1000 yuan, they pay 200 yuan per month. If the contribution base is 8000 yuan, they pay 1600 yuan per month.

Sometimes, even though the contribution base may be the same, the year must also be confirmed, because the result of calculating the average contribution index for different years is different.

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Second, knowing the social average wage over the years. The calculation of the contribution index is actually mainly the contribution base for that year divided by the social average wage of the year before. Therefore, the social average wage over the years is very important.However, due to the different definitions of average social wages across years, especially the shift from the urban non-private sector definition to the urban comprehensive definition in 2019, there has been a significant decrease in average social wages.

Thirdly, clarify the retirement location. The actual average social wage used varies depending on the place of retirement. For instance, Shanghai's average social wage has reached 12,307 yuan, while Shandong Province only has 6,359 yuan in 2023.

If our contributions are transferred between different regions, the individual contribution base remains unchanged. Therefore, if one can retire in another place, it is possible to have an average contribution index lower than 0.6 or higher than 3. In such cases, there will be no supplementation; the pension will be calculated based on the actual results.

Fourth, calculate the contribution index over the years. There have not been significant issues with the contribution years in recent years, but let's consider the contributions from earlier years.

In 1992, the basic old-age insurance system reform for enterprises was gradually implemented across the country. Initially, the calculation method for pension benefits continued to follow the old method without change.

It was not until 1995 that the state required the establishment of a personal account system, and we began to accumulate personal accounts based on a certain percentage of the contribution base. It can be said that it was from this time that there was a clear record of the contribution base.

In fact, some places like Shenzhen established personal accounts as early as 1992. Shandong Province has three different times for establishing personal accounts: enterprises in Qingdao in October 1994, provincial enterprises in January 1995, and other enterprises in January 1996.

The calculated average contribution index is not only used for the relevant years; in fact, for the basic pension, it covers the entire contribution period.Additionally, retired personnel from government and public institutions all have a deemed contribution index, which is determined based on factors such as the position level at the time of retirement. However, in some places like Beijing and Tianjin, enterprise retirees also have a deemed contribution index for deemed contribution years, and generally, enterprise retirees are calculated as 1.

Overall, the calculation of the contribution index is indeed quite complex. Generally, it is sufficient to make a rough estimate, as it is an average value over several decades and will not be too far off. #Top Headline Creation Challenge#