China’s Gradual Retirement Age Delay to Tackle Demographic Shifts

China has officially decided to gradually delay its statutory retirement age to address demographic challenges. The minimum pension contribution period will be raised accordingly, along with adjustments to retirement rules and enhanced support for elderly employment.

On September 13, 2024, the Standing Committee of the 14th National People’s Congress passed the Decision on the Implementation of Gradual Delayed Retirement Age (the “Decision”).

According to the Decision, starting from January 1, 2025, China will simultaneously begin delaying the statutory retirement age for both male and female employees. Over a period of 15 years, the statutory retirement age for male employees will gradually be extended from the current 60 years to 63 years. For female employees, the retirement age will increase from 50 to 55 for those in blue-collar jobs, and from 55 to 58 for those in white-collar jobs, reflecting the distinction between different categories of employment.

Additionally, this meeting approved the Measures for the Gradual Delayed Retirement Age (the “Measures”) by the State Council, which stipulates corresponding changes to pension insurance, elderly career support, as well as voluntary retirement schemes.

How long will the statutory retirement age be delayed?

Starting from January 1, 2025, unless otherwise specified by the state, the statutory retirement age for male employees will be delayed by one month every four months, gradually extending to 63 years. This also applies to female employees whose original statutory retirement age was 55, with their retirement age gradually extended to 58 years. For female employees whose original statutory retirement age was 50, the retirement age will be delayed by one month every two months, gradually extending to 55 years old.

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In terms of implementation progress, the reform goal is not to be achieved in one step but gradually and incrementally. People nearing retirement will only have their retirement delayed by one or a few months, not by several years all at once. For example, for male employees born between January and April 1965, the statutory retirement age will be increased by one month, making it 60 years and 1 month; for those born between May and August 1965, it will be increased by two months, making it 60 years and 2 months.

Minimum pension contribution period

Starting from January 1, 2030, the minimum contribution period for employees to receive a monthly basic pension will gradually increase from 15 years to 20 years, with an increase of six months each year.

Employees who reach the statutory retirement age but have not met the minimum contribution period can extend their contributions or make a one-time payment to meet the requirement and receive their monthly basic pension.

The Measures clarify that this adjustment will begin to be implemented gradually from 2030. This means that for those retiring between 2025 and 2029, the minimum contribution period requirement remains unchanged at 15 years. This ensures that employees who are close to the original statutory retirement age and have already or are about to complete 15 years of contributions are not affected.

Meanwhile, the state will improve the incentive mechanism for pension insurance, encouraging employees to contribute for longer periods, contribute more, and retire later to receive higher pensions. The calculation ratio of the basic pension will be linked to the individual’s cumulative contribution period, and the calculation base of the basic pension will be linked to the individual’s actual contributions.

Rough estimates suggest that increasing the contribution period from 15 to 20 years could increase the monthly pension received after retirement by about 30 percent.

Voluntary early or delayed retirement

Employees who have met the minimum contribution period can voluntarily choose flexible early retirement, with a maximum early retirement period of no more than three years. However, the retirement age cannot be lower than the original statutory retirement age of 50 or 55 years for female employees and 60 years for male employees.

Employees who have reached the statutory retirement age can, with the agreement of their employer, choose flexible delayed retirement, with a maximum delay period of no more than three years.

The implementation must not violate the employee’s wishes, and it is illegal to force or indirectly force employees to choose a retirement age.

Such an arrangement respects individual preferences, not forcing everyone to reach the new statutory retirement age before retiring. Instead, employees can choose within a flexible range of three years before or after the statutory retirement age, based on their circumstances.

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For example, a female employee born in January 1982, with a new statutory retirement age of 58 years after the reform, can choose to retire between 55 and 61 years old. A male employee born in February 1976, with a new statutory retirement age of 62 years and 10 months, can retire no earlier than 60 years old, as retiring three years earlier would fall below the original statutory retirement age of 60 years.

Additionally, the Measures state that China will standardize and improve early retirement policies for special occupations. Employees engaged in special occupations specified by the state, such as underground work, high-altitude work, high-temperature work, and particularly strenuous physical labor, as well as those working in high-altitude areas, can apply for early retirement if they meet the conditions.

Preventing employment age discrimination

In response to public concerns about the employment of the elderly, the Measures explicitly require strengthening the prevention and management of employment age discrimination and encourage employers to hire more older workers.

The Measures propose a series of targeted measures, including improving the public employment service system, establishing a lifelong vocational skills training system, enhancing employment assistance for those in difficulty, and strengthening the protection of the rights and interests of workers in flexible and new forms of employment.

The Measures also states that employers hiring workers beyond the statutory retirement age must ensure that these workers receive basic rights, such as labor remuneration, rest and vacation, labor safety and hygiene, and work injury protection.

This is the first time China has explicitly stipulated the protection of labor rights for overage workers.

Pension contributions for unemployed individuals nearing retirement

The Measures propose that for individuals receiving unemployment insurance benefits and who are less than one year away from the statutory retirement age, the duration of unemployment insurance benefits will be extended until they reach the statutory retirement age. During the implementation of the gradual delay in the statutory retirement age, the unemployment insurance fund will pay their pension contributions as required.

Older unemployed individuals face significant challenges in re-employment and often lack stable income. The Measures take their actual difficulties into account, alleviating their concerns and ensuring a smooth transition to retirement. On one hand, the policy provides for the continued payment of unemployment insurance benefits to secure their basic living needs. On the other hand, it covers their basic pension contributions to prevent any interruption in payments that could affect their benefits.

Why China needs to delay its statutory retirement age

China faces several compelling reasons to delay its statutory retirement age, driven by demographic shifts, economic considerations, and international best practices.

The average life expectancy in China has significantly increased from around 40 years in the 1940s to 78.6 years today. This extended lifespan means that individuals remain healthy and capable of working well beyond the current retirement age.

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Meanwhile, the average education duration for new entrants into the labor force has risen from eight years in the late 1970s to 14 years today. Consequently, people are entering the workforce later, and without adjusting the retirement age, this could lead to under-utilization of human capital.

More importantly, China must proactively address its aging population. As of 2023, the population aged 60 and above reached 297 million, representing 21.1 percent of the total population, while those aged 65 and above exceeded 217 million, or 15.4 percent. By 2035, the elderly population is projected to surpass 400 million, accounting for over 30 percent of the population, marking a transition to a severely aged society. Concurrently, the working-age population has been declining since 2012, with an annual decrease of over 3 million. Delaying retirement can mitigate this decline, sustaining economic and social vitality.

On the other hand, extending the retirement age will result in longer contributions to the pension system, enhancing the accumulation in individual accounts. This will bolster the pension system’s financial health, reducing the pressure on payouts. Additionally, the duration of pension disbursements will be shortened, leading to lower overall pension expenditures.

Global trends indicate that delaying retirement increases the participation rate of older workers, fosters the growth of the “silver economy,” and enhances the income and spending power of senior workers. This, in turn, stimulates consumer demand and job creation.

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