China's New Statutory Retirement Ages from 2025
Starting on January 1, 2025, China is beginning a phased-in process to increase its statutory retirement ages. The previous ages—60 for men, 55 for women in managerial or white-collar roles, and 50 for women in non-managerial or blue-collar jobs—are being raised over a 15-year period. This major reform addresses a significant demographic challenge, as a shrinking workforce and a lengthening life expectancy put immense pressure on the national pension fund.
Detailed breakdowns of the new statutory retirement ages, the gradual increase mechanism, and a comparison table of the old versus new rules can be found on {Link: Baker McKenzie website https://insightplus.bakermckenzie.com/bm/pensions_10/china-china-extends-statutory-retirement-age-what-does-this-mean-for-employers} and {Link: DLA Piper website https://knowledge.dlapiper.com/dlapiperknowledge/globalemploymentlatestdevelopments/2024/China-officially-approves-proposal-to-raise-retirement-age}.
Pension Contribution Requirements
The minimum number of years an employee must contribute to the state-run pension insurance fund is also increasing to ensure the system's long-term sustainability. Starting January 1, 2030, the minimum contribution period will begin to increase from the current 15 years. It will rise by six months each year until reaching 20 years by 2039.
Employees who reach the new statutory retirement age but have not met the minimum contribution years can still become eligible by making up the difference through extended payments or a one-time lump-sum payment.
Flexible Retirement Options
In conjunction with the mandatory age increases, the new policy introduces flexibility for employees to manage their retirement timeline. Early retirement is possible up to three years before the new statutory age, provided the minimum contribution period is met and retirement doesn't occur before the original statutory age. Employer consent is not required for early retirement, but three months' written notice is needed.
Deferred retirement is also an option for up to three years beyond the new statutory age with mutual agreement between the employee and employer. During deferral, the employment relationship and social insurance contributions continue.
Why is China Raising the Retirement Age?
There are several critical factors driving this reform:
- Demographic Crisis: China's birth rate has plummeted, and its population is aging rapidly. With fewer young workers entering the labor force, there is a growing imbalance of workers to retirees.
- Fiscal Strain on Pension System: A declining workforce contributing to pensions, combined with a rising number of retirees, is putting the state pension fund under significant financial pressure. Estimates have suggested the fund could run out of money by 2035 without reform.
- Increased Life Expectancy: When the original retirement ages were set in the 1950s, the average life expectancy was much lower, around 40 years. Now, with a life expectancy of nearly 79, the previous retirement ages are no longer financially sustainable.
- Alignment with Developed Economies: The reform also brings China's retirement ages more in line with those of many other developed nations, which have also raised their retirement ages to cope with similar demographic shifts.
Conclusion
The reform of China's retirement age, beginning in January 2025, represents a significant policy shift aimed at ensuring the long-term viability of the national pension system amidst a demographic crisis. By gradually increasing the retirement age for men and women and extending the minimum pension contribution period, the government seeks to balance a shrinking workforce with a growing retiree population. While the changes introduce flexibility through early and deferred retirement options, they also mark a departure from a long-standing system, reflecting the immense economic and social pressures the country faces in the coming decades. For both domestic and foreign employers and employees, understanding the new rules and their phased implementation is crucial for effective workforce planning and retirement preparation.
