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Pension Systems in the United States and China.
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This paper compares the pension systems in the United States and China.
Most societies are ageing; thus, the number of retirees is increasing daily, making the number of people depending on government pension system to rise. This has been experienced both in the USA and China. The pension plan of the USA is usually divided into four parts; the government provided a pension plan, individual retirement accounts funded by the employee, individual retirement account funded by employer and corporate pension plans. The first pension plan in the USA was started in 1875 by the American Express CO. However, between 1932 to 1935, the first social security act was passed setting the retirement age as 65 while the life expectancy was 60. Moreover, the pension plan of china was conceived out of war and suffering; a formal pension system in China was developed in the 1950s. In 1984 the pension plan was improved to cover the military personnel. Between 1984 to 2004, the population of china rose as the number of workers rose, and the population has continued to age. This posed a huge threat to the pension plan in place. To solve the challenges, a new pension plan was put in place in 2005, which was referred to as the enterprise employee basic pension. Moreover, the china pension policy is not as complicated as that of the USA while it is not also effective compared to that of the USA. For one to receive a pension in China, he must be 60 years.
The retirement plan in united states is made up of three pillars which are the social insurance, private retirement pension and self-administered individual retirement account. On the other hand, the Chinese pension system is also made up of three pillars which are basic pension enterprise annuity, voluntary personal savings and pension plan which is usually supported by low-security and non-economic aid systems. However, for this government to handle the issue of retirement benefits and the rising number of retirees, they should increase the retirement age and put in place good pension management plans and systems. China, for example, has many older people despite the many funds being allocated to pension funds. However, with the improvement of the social security system in China, there has been an improvement in the number of insured persons compared to the pension balance. In the past few years, the number of those insured has risen to 915.48 billion by 2016 from 787.96 in 2012. On the other hand, a good number of families in America have not saved for their retirement. It has been estimated that about 40 million families did not have retirement savings by 2013. Most Americans depend on the 401(k) program. Challenges facing the public pension crisis usually come from accumulated issues such as effects of the capital market, insufficient government investments, the optimistic estimate of pension debt and excessive pension benefits. In united states the social security pension is being affected by three-factor which are lack of input from the government, benefits of civil servants are higher compared to the cost the government can afford and inadequate estimates of pension debts. In China, situations are different. The Chinese government is thought to have enough money but lacks the best system in place. On the other hand, the population of china is very high for the government to spend all of its money in a retirement program. The china retirement program is facing five challenge. First is that the coverage of the existing pension program is narrow; secondly, the normative government documents of the existing old-age insurance in china does not mention the level of legislation, thirdly is the loophole in pension funds management, poor working attitude and lastly is that the retirement age is short. Females in the private sector retire with 50 years, and those working for the government retire with 55 years. Moreover, males working in the private sector retire with 55 years and those working for the government retire with 60 years.
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