China is expected to raise the basic pension for retirees nationwide by 2 percent from Jan 1 this year, according to a new notice on Thursday.

The retrospective increase, announced jointly by the Ministry of Human Resources and Social Security and the Ministry of Finance, applies to individuals who had completed retirement procedures and were receiving basic pensions by the end of 2024.

The adjustment, representing an average increase of approximately 2 percent over the 2024 average monthly pension level, is based on considerations including price changes and wage growth for active workers, according to the official notice.

The raise will follow a combination of adjustment methods, including the "fixed quota" approach, "payment-linked" adjustments, and special considerations for specific groups, with a particular focus on aiding lower-income retirees.

The "fixed quota" refers a uniform increase the pension amount for retirees of all types in a given region, regardless of their basic pension level, emphasizing the principle of fairness.

The "payment-linked" adjustment refers to pension increase tied to the individual retiree's length of contribution (years of payment into the system) and their current pension level, reinforcing the incentives for "more contributions, more benefits" and "longer contributions, higher benefits".

Meanwhile, additional increases are given for specific vulnerable groups, notably elderly retirees and those residing in remote and harsh areas.

The urban workers' basic pension fund achieved revenues of 7.5 trillion yuan ($1.04 trillion) against expenditures of 6.8 trillion yuan in 2024, resulting in a slight surplus, according to a report by the Ministry of Human Resources and Social Security.

The national coordination system for enterprise employee pensions, a key central government initiative, effectively redistributes funds. In 2023, this system transferred 271.6 billion yuan to support provinces facing funding difficulties, according to China Central Television.

As of 2024, the urban workers' basic pension fund held cumulative reserves of 7.1 trillion yuan. Additionally, the National Social Security Fund holds reserves exceeding 2.6 trillion yuan.