China's Social Welfare: Bank loans help retirees who cannot afford pension funding

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Imagine struggling to find a stable job all your life, with the result that once you reach your 60s, you can't collect a pension. It's a dilemma that faces many of China's elderly. Now a new program is helping out. CGTN's Feng Yilei reports.

3 years after reaching China's retirement age, 63-year-old Bian Rongjun is finally getting his long-awaited pension. After missing 60-thousand yuan worth of payments over the years that were meant to contribute to his pension fund, he was not able to get the money after his retirement. But thanks to a new program, Bian reaps the benefits monthly.

BIAN RONGJUN PENSIONER "It allows me to borrow 50 thousand yuan from a local bank. With another 10 thousand from my friend, now I can get nearly 3000 yuan pension every month. I repay the loan with one third of that and the rest is adequate for daily life."

The program is called Pension Loan- an idea proposed by Dandong government's social security department. It aims to improve the living standards of the low-income elderly, while maintaining the sustainability of pension funds.

QU LIZHI, DIRECTOR DANDONG SOCIAL SECURITY CENTER "For people without stable jobs or income, especially quite a few laid-off SOE workers here in this area, it's common for them to feel heavy pressure to support family and pay pension funds. And so they cannot get periodic repayments when they are old."

Since taking effect, pension loans have helped nearly 300 retirees like Bian. The lending amount has exceeded ten million yuan. But the local authority says it's still a small number, considering that 7000 people are struggling to fill similar pension gaps due to not contributing enough to their pension funds when employed.

FENG YILEI DANDONG, LIAONING PROVINCE "The main concern among retirees - many still worry that borrowing money will trap them in debt. Here at the social security center, a one-stop service counter has been set up to clear up misunderstandings and promote the plan to more in need. But whether pension loans are actually burdens to the applicants presents a precise mathematics problem."

A Bank of Dandong manager explains how they are trying to help without increasing pressure on borrowers or lenders.

ZHANG KAI, MANAGER MICROCREDIT DEPT., BANK OF DANDONG "We set the loan limit at 50 thousand yuan - an amount that can make up for most pension contribution deficiencies. The repayment period is five years and the interest rate is just slightly above the national benchmark so that pensioners won't feel pressure of repayment."

Bank of Dandong also manages the loans, together with the government bureau in a closed loop, to minimize risks rising from economic disputes or death of borrower. But experts say there is still room for improvement.

QU LIZHI, DIRECTOR DANDONG SOCIAL SECURITY CENTER "We have done research elsewhere in China where there are similar attempts to what we're doing. Some adopt discount government loans. We are not doing that because of government's tight finances, but we plan to gradually introduce discount policies to increase pension funds and help more people."

As China moves on to the 15th consecutive year of basic retirement pension increases, it has also decided to reduce business contributions to social insurance schemes. That takes the nation to a critical point, where more efforts are likely to replenish social security funds and to ensure the retirement well-being for everyone, now and in the future. Feng Yilei, CGTN, Dandong, Liaoning province.