Social security fund is a special fund established for the implementation of social security system in accordance with the provisions of relevant national laws, regulations and policies.

Social security funds are generally set up according to different projects, such as social insurance funds, social relief funds and social welfare funds. Among them, social insurance fund is the most important part of social security fund.

Social insurance fund refers to the special funds paid by the payer and the payer according to a certain proportion of the payment base and raised by other legal means according to national laws and regulations in order to protect the social insurance benefits of the insured.

Social insurance fund refers to a special fund for paying social insurance benefits, which the state requires the whole society to establish through legislation in order to ensure a reliable financial guarantee for social insurance. Assets purchased with such funds and their value-added parts also belong to the scope of social insurance funds.

Social insurance fund is a fund raised by the state for holding social insurance undertakings, which is used to pay insurance benefits and allowances enjoyed by workers due to temporary or permanent loss of working ability or job opportunities. The social insurance fund shall determine the source of funds according to the types of insurance and gradually implement social pooling. Employers and workers must participate in social insurance and pay social insurance premiums according to law.

The sources of social insurance funds in China can be roughly divided into four aspects:

The insurance premium paid by the insured according to a certain proportion of his wage income (if the wage income cannot be determined, it shall be calculated according to the average wage of the employees);

The insurance premium paid by the insured unit according to a certain proportion of the total wages of the employees of the unit;

Government financial subsidies to social insurance funds;

Bank interest or return on investment from social insurance funds and social donations, etc.

Social insurance funds mainly include five categories, namely: basic old-age insurance funds, basic medical insurance funds, industrial injury insurance funds, unemployment insurance funds and maternity insurance funds. In addition to the basic medical insurance fund and maternity insurance fund combined accounting, other social insurance funds are accounted for separately according to social insurance types. Social insurance funds implement a unified accounting system throughout the country. Social insurance funds shall be earmarked for special purposes, and no organization or individual may occupy or misappropriate them in any form.

The smooth raising of social insurance funds is the premise and foundation for the normal operation of social security system. In the process of raising social insurance funds, we should always implement the basic principle of balance of payments (including horizontal balance and vertical balance) and classify the raising modes of social security funds. There are three main ways of financing in the world: pay-as-you-go system, complete accumulation system and partial accumulation system.

Pay-as-you-go system

Pay-as-you-go system is a kind of financing method which is based on horizontal balance and implemented in accordance with the prescribed income model, and social security institutions carry out social financing according to the required insurance amount.

Generally speaking, employers and employees pay social insurance tax or social insurance premium according to a certain proportion of total wages. This financing mode requires that the expenses that a social security measure needs to pay in the current year or in recent years should be budgeted first, and then distributed to the units and individuals participating in social insurance according to a certain proportion, and then paid in the current year. This model generally determines income by expenditure, leaving no accumulation.