Imagine struggling to find a stable job all your life, with the result that once you reach your 60s, you're unable to collect a pension – a dilemma that many Chinese elderly are facing. They are ineligible to receive benefits paid after retirement because they have been missing a big amount of payments over the years that were meant to contribute to their pension fund. 

In northeastern Chinese city of Dandong, where state-owned enterprises (SOEs) make up for a large share of the local economy, the problem is exacerbated as millions of workers at SOEs were laid off in the late 1990s. Many felt heavy pressure to support the family and hardly had any money to spare for their future.

Authorities say over 7,000 people in this region have difficulties receiving periodic pension payments when they are old, due to not contributing enough to their pension funds during their employment years. 

To give those retirees to better access to their nest egg, the local government's social security department, together with Dandong Bank, has launched a new program called Pension Loan. They believe the move will improve the living standards of the low-income elderly while maintaining the sustainability of pension funds.

At Dandong Social Security Center, we met 63-year-old Bian Rongjun who is finally collecting his long-awaited pension three years after reaching China's retirement age.

He was not able to access the fund after retiring due to missing 60,000 yuan worth of payments over the years that were meant to contribute to his pension fund. Thanks to the new advance plan, Bian borrowed 50,000 yuan from the local bank to fill the gap and manage to reap the benefits.

"I now make nearly 3,000 yuan of pension income every month. I repay the loan with about 1,000 yuan and the rest is adequate for my daily life," said Bian.

Since taking effect, pension loans have helped nearly 300 retirees in the city. The lending amount has exceeded ten million yuan. Nevertheless, the local authorities say it's still a small number and there's still room for improvement. 

Right now 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. 

Pension Loan: a burden on borrowers or lenders?

Among retirees, many still worry that borrowing money will trap them in debt. Whether pension loans are actually burdening to the applicants presents a precise mathematic problem.

Bank of Dandong's microcredit department manager Zhang Kai explained to CGTN how they are trying to help without increasing pressure on both sides. The banker said they set the loan limit at 50 thousand yuan which is an amount that can make up for most pension contribution deficiencies. There's no need for a lien upon personal property. 

Besides, the repayment period is five years and the interest rate is 4.95 percent, just slightly above the national benchmark. "Each month pensioners' loan repayment amount is no more than one-third of their pension withdrawal so that they won't feel heavy pressure of repayment," Zhang said.

Also, the Bank of Dandong manages the loans, together with the government in a closed loop, to track the credibility of applicants and to minimize loan risks rising from economic disputes or death of the borrower.

Alternatives for tackling the pension crisis

As China moves on to the 15th consecutive year of basic retirement pension rises, it has also decided to reduce business contributions to social insurance schemes. That takes the nation to a critical point, where more efforts are needed to replenish social security funds and to ensure the overall retirement well-being.

In central China's city of Loudi, 540 million yuan of pension loans have been granted to about ten thousand landless farmers struggling to fill similar pension gaps. The program works under a different rural social insurance system, with the maximum loan amount being 100,000 yuan and the loan period being 15 years. 

Qu Lizhi, director of the Dandong Social Security Center, said they have done a lot of research elsewhere in China where there are similar attempts to what they're doing. 

"Some adopt discount government loans. We are not doing that because of the government's tight finances, but we plan to gradually introduce discount policies to increase pension funds and help more people," Qu said. 

The Dandong government is also preparing to expand the Pension Loan program to the county level and senior citizens who will retire in the near future.