Implementation of house-for-pension program faces problems


China’s plan to implement a house-for-pension program on a trial basis in 2014 is facing many problems. Similar programs piloted earlier in cities like Shanghai and Nanjing earlier have either been questioned by the people or suspended due to lack of confidence.

Take Hong Kong for example. The Hong Kong government released a “reverse mortgage” program in 2011. A Hong Kong resident aged 55 or above can receive an old-age pension by mortgaging the property right of his/her house as long as the house is less than 50 years old. The resident is also allowed to draw a loan for emergency use. A 50-square-meter house brings an old-age pension of HK$10,000 ($1,290) per month, according to China Business News. However, only 459 applications have been received.

Some people think the government intends to use the house-for-pension program to shed its responsibility of providing welfare for the elderly. Some others even think that the bank owns the property right of a house and gives the resident a small amount of money after deducting high interest and depreciation value. The Sino Insurance newspaper pointed out that these ideas may not be completely valid, but there are impediments to the implementation of the house-for-pension program.

First, it will be difficult for the government to implement the program if no related laws or regulations are in place. It will be hard to reach a fair settlement when a dispute arises.

Second, the 70-year property lease on the Chinese mainland would make the banks consider the risk of paying old-age pensions because there won’t be many years left in the house ownership after the resident passes away.

Third, most of the old people prefer to hand their houses to their children because of the traditional belief of “bringing up children for one old age” is deeply rooted in their minds.

Fourth, the program spans a long period of time and the housing policies and prices keep changing. Therefore, old people are worried that their pension won’t rise accordingly once the housing price increases, while banks and insurance companies are afraid of incurring losses caused by any decrease in the housing price.

(Edited by Billie Feng)

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