China's pension system is still in its infancy, but it is having to face the fact that China's people are getting old before they have made enough money to retire, experts have warned.

The country has a population of more than 1.33 billion, but only about 30 percent of them are covered by the pension system.

And, three out of 10 Chinese will be 60 years or older by 2040, according to a United Nations forecast.

According to Lin Yi, a specialist in social security at Southwestern University of Finance and Economics, China's pension system is unlike those of many European countries, which have developed and matured over time, and it faces grave challenges from the population aging and longer life expectancy.

That challenge, Lin warned, should not be underestimated.

"The pension fund scale should be expanded because an aging population means that more people will want a pension after they retire."

Lin suggests the system be made to cover more people with more diversified investment forms to ensure its sustainability.

The pension fund has a shortfall of 1.3 trillion yuan ($194 billion), said Zheng Bingwen, of the Chinese Academy of Social Sciences.

To deal with both the pension system's problems and an aging society, Zheng said China desperately needs to raise the retirement age.

Since life expectancy is increasing, he said, many people can still work beyond 65 or even 70, something that is quite common in the West.

"Besides, if there are more people working, more fortunes will be created and more money could be distributed to workers and retirees," he theorized.

Shanghai started trying out one such program in October, where urbanites can delay receiving retirement benefits and continue working after retirement age.

But Ministry of Human Resources and Social Security officials said on Oct 22 that the country will consider raising the retirement age only "in a cautious way".

At an EU-China roundtable on social security held in Beijing on Wednesday, Chris Daykin, a former UK government actuary, suggested a more flexible retirement age and more incentives to encourage people to continue working after they reach retirement age.

The retirement age in China now is 60 for males, 55 for female government officials and 50 for other female workers.

People have to pay into the pension account for at least 15 years before they retire.

Some analysts estimate that if the retirement age were to be extended by a year, the social security funding shortfall would be cut by 20 billion yuan.

To maintain the pension system, Zheng Bingwen said a more unified system would help China avoid the risks that the dispersed pension system can pose.

Zheng explained: "A multilevel system brings potential fiscal, social and even political risks."

For example, China's pension plan currently has four different modes of operation, which cover rural residents, civil servants, employees of public institutions and enterprise employees.

The more money Chinese workers put into their retirement account, the more they get after retiring.

On average, Zheng says, a civil servant can get twice as much as a company employee after retirement, and this is a possible hazard on the road to social stability.

"All people, whether they are civil servants, urbanites or rural people, should be covered by a unified pension scheme where pensions do not differ a great deal."

The government is saying it will cover all residents with the pension system by 2020.