The take-up rate for a government-backed reverse mortgage scheme remains low three years after its launch.
The "House-for-Pension" scheme, launched in July 2014 and trialed in Beijing, Shanghai, Guangzhou and Wuhan, allows homeowners to convert a portion of his or her property into cash and to receive monthly sums as retirement income.
According to official statistics, up to the end of July this year, only one insurance company had introduced the scheme, with just 65 households taking part nationwide. Half of the seniors involved had children, reported the China News Service.
Under the scheme, older homeowners can mortgage their properties to insurance companies in return for monthly payments over a specified term, or for the rest of their lives. The insurance company can sell the property to recoup the money once the owner dies, unless the mortgage loan is paid off beforehand.
Li Chuanxue, Chairman of Happy Life Insurance Company, said among the households which chose to receive pensions, most received between CNY5,000 (US$752) and CNY10,000 a month, with at least one household getting the highest pension of CNY30,000 monthly.
According to a survey conducted by Central China Normal University, just over 98% of the children of seniors involved in the scheme disapproved of their parents mortgaging their homes in return for a monthly pension. In Wuhan, only three households took part in the scheme over the past three years.
Dang Junwu, deputy director of China Research Centre on Aging, said that the reverse mortgage scheme has not caught on among the public for two main reasons. One is that the financial and legal system in China is not mature enough, so many citizens fear for their financial security. The other is that the market value of residential property is hard to predict.
Yu Gang, a lawyer at Zhuo Jian Law Firm, says there are risks in the "House-for-Pension," scheme, including property price fluctuations, terms and tenure, etc.
Wang Zhenyao, the director of the China Philanthropy Research Institute of Beijing Normal University, said that the "house-for-pension" scheme is targeted at seniors with particular needs and is a supplement for the current pension system in China.