Less than 100 households have chosen to take part in the "house-for-pension" scheme three years after the government launched a trial.
Three years after a government backed reverse mortgages scheme was launched in China, it's reported the take up rate has remained very low.
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, receiving a monthly sum.
According to official statistics, up to the end of July this year, only one insurance company had initiated the scheme, with just 65 households taking part nationwide. Half of the seniors involved had children.
Under the scheme, older homeowners can mortgage their properties to eligible 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 loan is paid off beforehand.
Li Chuanxue, Chairman of Happy Life Insurance Company, said among the households who chose to receive pensions, most received between 5 and 10 thousand yuan (about 752 and 1,505 US dollars) a month, with at least one household getting the highest pension of 30,000 yuan 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 Center on Aging, said the scheme backfires for two main reasons. One is the financial and legal system in China is not mature enough, so many citizens fear for their financial security. The other is the market value of houses is hard to predict.
Yu Gang, a lawyer from Zhuo Jian Law Firm, says there are risks in the "House-for-Pension," scheme, including house price fluctuations, house terms and tenure, etc. which are likely to eventually lead to seniors ending up unable to get pensions.
Experts suggest that, compared with similar equity release schemes in the UK and US, where the system is quite mature, the House-for-Pension scheme is new and still a niche product, and is mainly an option for childless urban seniors who want to improve their livelihoods. Its introduction in China is seen as an effort to diversify the eldercare market, reports China Daily.
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.
As of the end of 2013, the number of people aged above 60 in China stood at 202 million, or nearly 15 percent of the total population, according to official statistics.