As the time approaches closer to October 2024, some friends often ask: After September 2024, will the pension system be merged, and will the retirement pensions for government and public institution employees be reduced?

In fact, the country has never spoken of merging the pension system. What has been gradually merging is the pension insurance system.

What is the merging of the pension insurance system?

In October 2014, government and public institutions implemented the reform of the pension insurance system. The pension insurance system established by government and public institutions is also generated from the payment of employee pension insurance, and the pension benefits are also composed of two parts: the basic pension and the personal account pension, and the calculation formula is completely unified.

① The calculation formula for the basic pension: The social average wage of the year before retirement × (1 + the average contribution index of the individual) ÷ 2 × the number of years of contribution × 1%.

The social average wage of the year before retirement is that of each province, and now many places also call it the pension payment base of the year.

In fact, according to the calculation formula, with the upper and lower limits of the annual payment base starting from January, paying at the 60% level, one can receive 0.8% of the social average wage of the year before retirement per year. Paying at the 100% level for one year, one receives 1%. Paying at the 300% level for one year, one receives 2%. Both enterprise and government and public institution employees follow this rule.

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② The calculation formula for the personal account pension: The balance of the individual's pension insurance account at retirement ÷ the number of months determined by the retirement age.

The personal account balance is accumulated at 8% of the payment base, and the interest rate for the personal account is implemented with a nationally unified rate. Therefore, as long as the payment base is the same and the retirement age is the same, the personal account pension is the same.So, after the implementation of the pension insurance system for government and public institutions in October 2014, the integration was essentially completed.

What are the differences between the pension systems for enterprises and government and public institutions?

In fact, after the pension insurance system reform was implemented for government and public institutions, the state first set a ten-year transition period (from October 2014 to September 2024). This was designed to prevent a significant disparity between the retirement benefits calculated under the new method and the old method for government and public institutions.

Depending on the retirement time, the new method benefits are based on the old method benefits, with a certain percentage (if the new method benefits are higher) gradually increasing from 10% to 100%. If the old method benefits are higher, there is a guaranteed minimum based on the old method benefits. However, for the vast majority, the new method benefits are higher.

After October 2024, the new method of retirement benefits will include transitional pensions and occupational annuity benefits.

① The transitional pension benefit can be understood as a compensatory treatment for the period before the end of September 2014, when there was no implementation of pension insurance and occupational annuity individual account accumulation.

The calculation formula for the transitional pension mainly involves the length of the deemed contribution period and the deemed contribution index, combined with the local transitional coefficient, to receive a certain percentage of the average social salary of the previous year before retirement.

Since it is linked to the average social wage, this part of the benefit is still very cost-effective.This part of the treatment will change over time, as the years of deemed contribution for retirees will generally become shorter, eventually completing the transitional task.

②The occupational pension treatment is actually a supplementary pension mechanism established in reference to the enterprise annuity system. It accumulates monthly at 4% for individual contributions and 8% for employer contributions (unit contributions), with the actual account accumulation part being entrusted to the corresponding fund management company for investment and operation.

The calculation of the occupational pension is based on the individual account pension formula. A portion is received monthly until the individual account of the occupational pension is exhausted, which is usually more than a decade or two later. If one wishes to receive it for a lifetime, they can purchase commercial life insurance.

Additionally, the withdrawal of occupational pension is subject to personal income tax.

From the above analysis, we can understand that we do not have a pension convergence, but rather a convergence of the pension insurance system. In terms of the basic pension insurance system, everyone contributes based on the same base and receives the same treatment. As long as the contribution base is high and the contribution period is long, the pension treatment will also be high. Therefore, there is no situation of reduced pension. #Public Institution Pension Convergence#