"Retirement Reform in Progress: The Path to Implementing Gradual and Flexible Retirement"

Introduction

On September 13, 2024, the Standing Committee of the National People's Congress adopted the "Decision on Implementing the Gradual Delay of the Statutory Retirement Age" and approved the "Measures of the State Council on the Gradual Delay of the Statutory Retirement Age" (hereinafter referred to as the "Measures"), which came into effect on January 1, 2025. To implement the "Decision of the Standing Committee of the National People's Congress on Implementing the Gradual Delay of the Statutory Retirement Age," the Ministry of Human Resources and Social Security, the Organization Department of the Central Committee of the Communist Party of China, and the Ministry of Finance jointly issued the "Interim Measures on the Implementation of the Flexible Retirement System" (hereinafter referred to as the "Interim Measures") on January 1, 2025, clarifying the procedures for flexible retirement and the receipt of basic pensions.

The "Measures," in accordance with the principles of "small-step adjustments, flexible implementation, categorized advancement, and coordinated consideration," adjust the statutory retirement age in a gradual manner. This involves specific rules for delaying the retirement age, adjustments to the contribution period for pension insurance, flexible retirement, protection of the rights and interests of workers beyond the statutory retirement age, extension of the period for receiving unemployment insurance benefits, and early retirement for special types of work, among other provisions. This edition aims to help readers gain a focused understanding of the relevant regulations concerning the gradual delay of the statutory retirement age, flexible early retirement, and flexible deferred retirement.

I. Policy Highlights: Gradual Adjustment and Flexible Choices

(A) Gradual Delay of the Statutory Retirement Age

The "Measures" stipulate detailed rules for the gradual delay of the statutory retirement age. Effective January 1, 2025, the retirement ages for various categories of employees are adjusted as follows:

(II) Increase in the Minimum Contribution Period for Basic Pension Insurance

For employees retiring between 2025 and 2029, the minimum contribution period for receiving basic pension benefits remains fifteen years. Commencing January 1, 2030, the minimum contribution period for basic pension insurance will be gradually increased by six months each year. Over the next ten years, the minimum contribution period will be progressively raised from the current fifteen years to twenty years. Starting in 2039, the minimum contribution period for employees to receive basic pension benefits shall be confirmed as twenty years. The adjustments are as follows:

(III) Voluntary Flexible Retirement System

To further reflect the flexibility and human-centric nature of the policy, the Measures introduce a flexible retirement system. Workers who have met the minimum contribution period for basic old-age insurance may, at their own discretion, voluntarily opt for early retirement on a flexible basis, with the early retirement period not exceeding three years; provided, however, that the retirement age shall not be lower than the original statutory retirement ages of fifty years for female workers, fifty-five years for female cadres, and sixty years for male workers.

Meanwhile, workers who have reached the statutory retirement age may, upon mutual agreement with their employer, also choose to defer retirement on a flexible basis, with the deferral period not exceeding three years.

The flexible retirement system breaks away from the rigid constraints of the traditional retirement age, granting workers greater autonomy in decision-making and enabling the choice of retirement timing to better align with individual actual needs. The specific modalities for voluntary early flexible retirement and deferred flexible retirement are further clarified in the Interim Measures for the Implementation of the Flexible Retirement System:

(1) Clarification of the Time Limit for Voluntary Flexible Early Retirement Applications:Pursuant to the Interim Measures, an employee who voluntarily chooses flexible early retirement shall notify the employing entity in writing at least three months prior to the employee's selected retirement date.

(2) Determining the Flexible Deferred Retirement Period in Writing: Pursuant to the Interim Measures, when an employee reaches the statutory retirement age, the employing entity and the employee may, upon mutual agreement, implement a flexible deferred retirement. The deferral period shall not exceed three years from the statutory retirement age. The employing entity and the employee shall, at least one month in advance, specify matters including the deferred retirement period in writing. Once the flexible deferred retirement period is determined, it shall not be further extended.

During the period of flexible deferred retirement, the employing entity and the employee may, by mutual agreement, terminate the flexible deferred retirement and proceed with the retirement formalities in accordance with the regulations.

(4) Improving the Incentive Mechanism for Endowment Insurance

Article 4 of the Measures stipulates that the calculation and payment of pensions shall implement an incentive mechanism whereby employees receive higher benefits for longer contribution periods, higher contribution amounts, and later retirement. The calculation ratio of the basic pension is linked to the individual's cumulative contribution years, the calculation base of the basic pension is linked to the individual's actual contributions, and the individual account pension is determined based on factors such as the individual's retirement age and the balance in the individual account.

(5) Protection of Rights and Interests for Workers Beyond Statutory Retirement Age

Article 6, Paragraph 1 of the Measures clarifies the content of protecting the rights and interests of workers who have exceeded the statutory retirement age. Employers that hire workers beyond the statutory retirement age shall ensure the workers' fundamental rights and interests, including labor remuneration, rest and leave, occupational safety and health, and work-related injury protection. This provision also strengthens the employer's mandatory work-related injury insurance liability for workers beyond the statutory retirement age.

(6) Protection for Unemployed Workers Approaching Retirement

Article 7 of the Measures stipulates that for individuals receiving unemployment insurance benefits who are less than one year away from the statutory retirement age, the period for receiving unemployment insurance benefits shall be extended until the statutory retirement age. During the implementation of the gradual delay of the statutory retirement age, the unemployment insurance fund shall pay the endowment insurance premiums for such individuals in accordance with regulations.

(7) Early Retirement Policy for Special Types of Work

Prior to the implementation of the Measures, Article 1 of the Interim Measures of the State Council Concerning Retirement and Resignation of Workers also provided clear provisions on early retirement for special types of work. Workers engaged in underground work, high-altitude work, high-temperature work, particularly heavy physical labor, or other work harmful to health, who have reached the age of 55 for men and 45 for women, and have a continuous length of service of ten years, shall retire.

Furthermore, Article 8 of the current Measures clarifies the state's efforts to standardize and improve policies on early retirement for special types of work and other categories. Employees engaged in special types of work as stipulated by the state, such as underground work, high-altitude work, high-temperature work, and particularly heavy physical labor, as well as those working in high-altitude regions, who meet the prescribed conditions may apply for early retirement. However, specific regulations regarding the improvement of early retirement policies for special types of work have not yet been promulgated; the retirement policies for specific special types of work shall be subject to the formally issued regulations.

II. Policy Interpretation: Further Elucidation of the Measures with Examples

We will use several specific scenarios to help everyone better understand the relevant provisions on the gradual delay of the statutory retirement age, flexible early retirement, and flexible deferred retirement.

(I) Gradual Delay of the Statutory Retirement Age

According to the provisions of the Measures, the gradual adjustment of the statutory retirement age is as follows:

(1) For male employees and female employees whose original statutory retirement age was 55, the retirement age will be delayed by one month for every four months, with male employees gradually reaching 63 years of age and female employees gradually reaching 58 years of age;

(2) For female employees whose original statutory retirement age was 50, the retirement age will be delayed by one month for every two months, gradually reaching 55 years of age.

Case 1: Mr. Li is a male employee born in May 1965. According to the original regulations, he should have retired in May 2025 upon reaching the age of 60. However, pursuant to the gradual delay provisions, Mr. Li is required to delay his retirement by two months; therefore, his retirement date becomes July 2025. During this additional two-month work period, Mr. Li's employer shall pay him wages according to the normal salary standards and continue to pay social insurance premiums such as pension insurance on his behalf.

Case 2: Ms. Wang, born in March 1970, serves as an enterprise manager at her unit, and her original statutory retirement age was 55. According to the gradual delay provisions, she is required to delay her retirement by one month, postponing her retirement from the original date of March 2025 to April 2025. Similarly, the employer must pay her wages normally during the deferred retirement period and continue to pay social insurance premiums.

(II) Flexible Early or Deferred Retirement

According to the provisions of the Measures, employees who have met the minimum contribution period for pension insurance may voluntarily choose flexible early retirement or deferred retirement. Furthermore, the Interim Measures also provide clear guidance on the application and methods for choosing flexible early retirement or deferred retirement.

Specifically:

(1) Early Retirement: The early retirement period shall not exceed three (3) years at maximum, and the retirement age shall not be lower than the original statutory retirement age (original statutory retirement age: fifty (50) years old for female workers, fifty-five (55) years old for female cadres, and sixty (60) years old for male workers); an employee who voluntarily chooses flexible early retirement shall notify his/her employer in writing at least three (3) months prior to the selected retirement date.

(2) Deferred Retirement: Flexible deferred retirement may be implemented on the premise of mutual agreement between the employer and the employee, with the deferral period not exceeding three (3) years at maximum; the employer and the employee shall specify matters such as the deferred retirement period in writing one (1) month in advance. Once the flexible deferred retirement period is determined, it shall not be further extended.

However, during the flexible deferred retirement period, the employer and the employee may, by mutual agreement, terminate the flexible deferred retirement and go through the retirement procedures in accordance with the regulations.

It is particularly important to note that:

(1) Regardless of whether it is flexible early retirement or deferred retirement, the minimum contribution period for pension insurance must be met. Employees opting for early retirement must satisfy the minimum contribution period corresponding to the year of their selected retirement date; whereas employees opting for deferred retirement must satisfy the minimum contribution period corresponding to the year of their statutory retirement age. As mentioned above, starting from January 1, 2030, the minimum contribution period for pension insurance will be gradually increased by six (6) months each year, until the minimum contribution period is progressively raised from the current fifteen (15) years to twenty (20) years.

For example:

A male employee reaches the reformed statutory retirement age in 2031, and the minimum contribution period for that year is sixteen (16) years.

lIf he chooses flexible early retirement in 2029, he only needs to meet the minimum contribution period of fifteen (15) years.

lIf the employee flexibly defers retirement to 2034, when receiving the basic pension in 2034, it is only necessary to meet the minimum contribution period of 16 years applicable in 2031, the year in which he reaches the statutory retirement age.

(2) Not everyone is eligible to choose deferred retirement. For civil servants, leaders and other management personnel of state-owned enterprises and public institutions, retirement procedures shall be handled promptly upon reaching the statutory retirement age.

Case Three: Master Zhang is a skilled technician, born in July 1972. According to the provisions on progressive delayed retirement, his statutory retirement date should be June 2034 (with a deferral of 1 year and 11 months relative to the original statutory retirement age). However, due to health reasons, after meeting the minimum contribution period of 17 years, Master Zhang chose flexible early retirement, retiring one year earlier, i.e., in June 2033. Accordingly, in March 2033, Master Zhang submitted a written application for voluntary flexible early retirement to his employer, which fully respected his wishes and promptly processed the retirement application.

Case Four: Ms. Li, born in November 1984, is an employee in a production operation position at an enterprise. According to the provisions on progressive delayed retirement, her statutory retirement age is 55, i.e., retirement in November 2039, with a corresponding minimum contribution period for pension insurance of exactly 20 years.

Ms. Li is diligent and responsible in her work, having accumulated extensive practical production experience. With the implementation of the delayed retirement policy, out of her passion for work, and also to increase her income and further enhance her pension benefits, Ms. Li wishes to continue working. Her employer, considering the importance of her experience to the production process, also strongly desires Ms. Li to continue working. Therefore, after negotiation, the parties reached an agreement one month before Ms. Li's statutory retirement age and signed a written deferred retirement agreement, whereby Ms. Li flexibly defers retirement by 3 years, i.e., retiring at the age of 58.

However, it should be particularly noted that the choice of deferred or early retirement will also have a corresponding impact on the final amount of pension received. Because the calculation of pensions follows the principle of "more contributions, more benefits; longer contributions, more benefits," early retirement, while allowing for earlier receipt of the pension, results in a lower contribution period and calculation base, leading to a lower monthly amount compared to normal retirement. Although deferred retirement postpones the receipt of the pension, the monthly pension amount after retirement will be relatively higher than that under normal retirement.

Thus, it can be seen that the reform of progressive delayed retirement is essentially committed to building a pension security system that embodies the principle of fairness while also taking into account the advantages of efficiency.

III. Guide for Inquiring about the Progressive Delayed Retirement Policy

The content of the "Measures of the State Council on Progressively Delaying the Statutory Retirement Age" fully considers the changes in China's demographic structure and the needs of socio-economic development. It also marks the first adjustment to the statutory retirement age since the founding of the People's Republic of China. The "Measures" grant workers more choices, allowing them to rationally plan their careers and retirement lives according to their own circumstances, and to independently choose a retirement plan suitable for their work and life, thereby meeting the diverse needs of workers in arranging their work and life. When choosing their retirement plan, workers must also strictly follow the procedures required by the "Interim Measures for the Implementation of the Flexible Retirement System" to submit applications and complete the procedures.

If anyone still has questions regarding their retirement age, they may also inquire about their corresponding statutory retirement age through the following online inquiry service channels:

(1) The website of the Ministry of Human Resources and Social Security;

(2) The National Social Insurance Public Service Platform;

(3) The National Human Resources and Social Security Government Service Platform;

(4) The Electronic Social Security Card;

(5) The 12333 Mobile App.

By accessing the "Statutory Retirement Age Calculator" mini-program through the above channels and entering personal information, the corresponding statutory retirement age and retirement year and month may be inquired. Insured persons may also inquire about their statutory retirement age through offline methods such as calling the 12333 consultation service hotline or visiting the service window of a social insurance agency.