The Two Parts of the Pension
Public pension = basic pension + personal account pension.
Basic pension: funded by employer contributions (16%), pay-as-you-go, pooled nationwide.
Personal account pension: your own 8% contributions, divided by the payout months.
The Formulas
Basic pension = (local average wage at retirement + indexed average wage) ÷ 2 × years × 1%
Personal account pension = account balance ÷ payout months
- Retire at 60: 139 payout months
- At 55: 170
- At 50: 195
Worked Example: 30 Years, CNY 10K Base
Assumptions:
- Contribution base: CNY 10,000/month
- Years: 30
- Retirement age: 60
- Local average wage: CNY 8,000
Basic pension = (8,000 + 10,000) ÷ 2 × 30 × 1% = CNY 2,700/month
Personal account = 10,000 × 8% × 12 × 30 = CNY 288K ÷ 139 months = CNY 2,072/month
Total ≈ CNY 4,772/month — a ~47% replacement rate.
How to Raise Your Pension
1. Contribute longer: each extra year adds 1% to the basic pension and grows the account.
2. Raise your base: a higher base lifts both the basic pension and the account.
3. Retire later: each deferred year adds 5%–10%, plus more contribution years.
4. Add commercial retirement saving: public pensions replace only 30%–50%; hitting 80% takes annuities or regular investing.