Get your pension to go

What can social insurance in china do for you? Here is what you need to know about social insurance, as well as what foreigners should do with their account when they decide to leave.

Foreigners who pay social insurance in China might have considered what they will do with it when they leave. They have also raised questions as to what the premiums are and who pays them.

Foreigners (including residents from Taiwan, Macau, and Hong Kong) working in China have been required to participate in the country’s social security system since 2011, according to the Interim Measures for Social Insurance System Coverage of Foreigners Working within the Territory of China (Interim Measures), released by the Ministry of Human Resources and Social Security (MOHRSS). However, some foreigners are exempt. China offers social insurance exemption for foreigners from countries which have signed bilateral social insurance exemption agreements, such as Germany, South Korea, Denmark, Canada, Finland, Switzerland, and the Netherlands.

But for those who do participate, the employer and the employee generally should pay five social insurance premiums: basic old-age insurance for employees (pension), basic medical insurance for employees, work-related injury insurance, unemployment insurance and maternity insurance. However, there are usually no unemployment benefits for foreign employees as a foreigner without permanent residency and not employed in China will not be permitted to continue living in China.

According to the Interim Measures, for foreigners who leave China before reaching the legal retirement age in the country, the social insurance individual account will be retained and will be renewed on a cumulative basis when the person returns to work in China.

Alternately, foreigners can apply to terminate their social insurance individual account upon written application before leaving China. The amount remaining in the individual account can be paid in a lump sum to the person. Foreigners must check the specific implementation regulations and application processes at their local Human Resources and Social Security Bureau.

To be noted, although the premiums for a pension are contributed to by both the employer and the employee, only the employee’s contribution, which is saved in the individual pension account, can be withdrawn.

As employees in China pay eight percent of their wages every month on a mandatory basis, the foreigner can withdraw the accumulative eight percent of their monthly salary as well as the corresponding interest from the pension individual account.

For instance, if a foreigner earns a monthly salary of 15,000 RMB ($2,180), paying 1,200 RMB ($174) to the individual pension account every month, and has had a three-year assignment in China – they can get back 43,200 RMB (1,200RMB x 12 x 3/$6,277) plus the interest.

A more convenient way to find out the balance of one’s social insurance individual account is through the local social security online service platform, either via the official website or the app. In some areas, WeChat and Alipay also offer residents a service to check their social security balances.

For information on specific application procedures for closing the social security account and withdrawing the balance of the social insurance individual account, foreign holders of these accounts must consult with their local Human Resources and Social Security Bureau.

Normally, the bureau requires the employer or the employee to bring materials relating to the termination of the labor relationship, the passport, valid residence permit, and social security card of the person in question as well as the application forms with personal signature or company stamp to suspend the social insurance account and enable withdrawal of the pension deposit in one lump sum.

Given the changing legal and fiscal environment, managers and foreign employees are advised to stay updated with the latest information on how to deal with their respective social security accounts and payments.

Employers should consider working with an advisor that can help them develop expatriate-friendly exit procedures for their human resource teams.

This article was first published by China Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in ChinaHong KongVietnamSingaporeIndia, and Russia. Readers may write for more support.