Under the new system, China’s 8 million civil servants and 32 million employees of public institutions must pay 8 per cent of their salaries into the pension scheme, while their employers contribute 20 per cent.
Previously, public sector workers did not have to make any contributions and were paid up to 80 per cent of their salary as a pension when they retired.
The transition period for the public sector to make the switch to the new scheme ends in October.
Public sector employees have raised concerns that the change could leave them worse off when they retire.
A 59-year-old civil servant in southern Guangdong province, who wished to be identified only by his surname Huang, said he had decided to stop working a year earlier than the retirement age of 60.
He said that was mainly due to uncertainty around the new pension scheme, and because of government belt-tightening amid the softening economy.
China’s civil servants have been facing big cuts to their wages and benefits in recent years.
Huang said his human resources department could not give him an exact figure for his pension if he chose to retire next year under the new scheme.
“For many of us in the system, a bird in the hand is worth two in the bush,” Huang said. “I know of a dozen others who are a similar age to me who have also applied for early retirement.”
He said his pension under the “old scheme” will be about 12,000 yuan (US$1,680) a month since he earns about 15,000 a month.
Huang said that would be enough to live comfortably in his hometown, Huizhou, where the average monthly salary is around 10,000 yuan.
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Two officials in Shanghai, who have also applied for early retirement, shared Huang’s sentiments.
One of them said he was worried about the ongoing cuts to civil servants’ pay and their impact on retirement benefits.
“We’ve seen pay cuts even in Shanghai – the country’s commercial and financial centre – not to mention other cities,” the official said.
“That will have a negative impact on our pensions so it might be better to retire early, so we end at a higher point.”
Some employers are trying to entice those seeking early retirement to stay on.
A surgeon at a public hospital and a university lecturer, both in Guangdong, said they had applied to retire early because they were also concerned about losing out under the new pension system. Their employers asked them to remain in their jobs for 20 months, offering to match the retirement benefits they would get under the old scheme.
The surgeon, who sought early retirement on medical grounds since he is recovering from treatment for stomach cancer, said he was persuaded to stay on to help train younger surgeons. The hospital promised to pay him a slightly higher pension with full medical coverage.
Alfred Wu, an associate professor at the National University of Singapore’s Lee Kuan Yew School of Public Policy, said the current rush among public sector workers to take early retirement shows that Beijing needs to do more to boost confidence in the new system.
“Many civil servants who want to lock in their retirement benefits are trying to hedge against future risks,” Wu said. “They are the insiders, knowing the actual financial situation of the government and public institutions.”
