A preliminary investigation on saving towards old age finance in China

Abstract

The issues with an aged population and a low GDP per capita raise the concerns of retirement financing for current working people. A recent study by Standard Chartered Bank and Fudan University shows that there are some working adults who do not understand how the existing pension system will affect their lives after retirement and how they should financially prepare themselves for retirement. So it becomes our interest to explore how current working adults should be financially prepared for old age expenditures. The immediate objective of this paper is to investigate how people, mainly those who are currently working, will prepare themselves financially for old age. Since there is limited number of papers published on this issue, we can hardly find an existing model to replicate. As a result, a new model has been constructed in our study to project future expenditures after retirement and thus saving needed. Analysis of three scenarios yields explanations towards changes in key determinants of voluntary saving for old age. The study adds insights to our understanding about how existing pension system will exert an impact on average household saving via the effect on voluntary old age saving on the current working adults.