But since the transformation cost or historical debt problem after the launching of reform and opening-up has not been fully solved, the collected social pooling funds cannot cover the expenses, and the authorities usually have to overdraw the individual account to pay pension, creating a huge "empty account".

Although the government has tried to solve the problem by increasing the pension premium amount that enterprises' employees need to pay - 13 provinces are part of the pilot project - its actual collection by the end of 2010 was just 339 billion yuan ($56 billion) when 2.95 trillion yuan was needed to balance the account. The planned "partly funding" system is, therefore, facing increasing pressure of payment.

It has thus become necessary to raise the retirement age in China, which is relatively low: 60 years for men, and 55 or 50 for women depending on their job profile. This would make 54 years the actual average retiring age.

The existing retirement age was fixed by the government in the 1950s. The average life expectancy then was less than 50 years, so the rules made perfect sense. But since life expectancy has increased to 74 years today, the retirement policy needs to be changed.

More importantly, considering China's current development stage and emerging problems, the retirement age certainly needs to be raised. In a reform experiment, the Shanghai municipal government has since Oct 1, 2010, deferred paying pension to certain groups of people by three years. The effect of the experiment is similar to raising the retirement age. But before replicating the model in other places, the authorities should study its pros and cons carefully lest it triggers social instability in the future.

In the final analysis, the government should focus on three aspects when raising the retirement age. First, it should follow the people-first principle by taking into account the real situations and needs of different groups, and respect people's legal rights.

Second, it should solicit public opinion from across the social divide before putting the policy into practice.

And third, it should consider the security problems of some special groups to ensure that the changed retirement policy runs smoothly.

The author is the director of Social Security Institute, affiliated to the Ministry of Human Resources and Social Security.