China is set to introduce significant changes to its retirement and pension policies, marking the first adjustment in over six decades. In response to the challenges posed by an aging population and a shrinking workforce, these reforms aim to stabilize the country’s social welfare system. The gradual changes will begin in 2025 and extend over a 15 year period into the 2040s.
Retirement Age Increase in Phases
China's retirement age had remained unchanged since the 1950s, with men retiring at 60 and women at 50 (for blue-collar jobs) or 55 (for white-collar jobs). Under the new reforms, however, the retirement age for men will increase to 63 by 2040. Women in blue-collar positions will see their retirement age rise to 55, while those in white-collar jobs will retire at 58.
The reform will be introduced slowly, with incremental increases in retirement ages every few months, ensuring that the shift does not create sudden shocks in the job market. This phased approach is intended to spread the impact over time, allowing workers and industries to adapt to the changes gradually.
Addressing Demographic Pressures
The need for reform stems from China’s rapidly aging population. In 2023, China recorded its second consecutive population decline, signaling a demographic crisis. The proportion of people over the age of 65 is expected to rise sharply by 2040, creating significant strain on public resources, especially healthcare and pensions.
With life expectancy rising to 78.2 years and a declining birth rate, the workforce is shrinking, creating an imbalance. Fewer young workers are entering the labor market to support the growing number of retirees. This demographic shift has put China’s pension system under considerable pressure, with the country’s main state pension fund expected to run out of money by 2035.
New Pension Contribution Requirements in China
To address the financial strain on the pension system, China will also introduce new requirements for employee contributions starting in 2030. Workers will be required to contribute more to the social security system to qualify for pensions. By 2039, employees will need to have made 20 years of contributions to access their pension benefits. This change is expected to help sustain the pension system in the face of increased costs due to an aging population.
Implications for the Future
Employers will need to adjust their workforce planning strategies to accommodate an older workforce staying in their roles longer.
With the requirement to increase employee contributions to the social security system starting in 2030, employers will need to manage higher payroll expenses and ensure compliance with updated pension contribution regulations.
With incremental increases in retirement age, employers will need to stay informed and adapt their internal policies over the next decade.