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With the emergence of the “era of 100-year life spans,” it is important to continually review the operation of the pension system, to alleviate people’s fears in old age.
The welfare ministry said it will cut public pension benefits for fiscal 2022 by 0.4% from this fiscal year, a reduction for the second consecutive year.
The amount of pension benefits is revised each year according to the movement of commodity prices and wages among the working-age population. This time, the rate of change in wages was a 0.4% decline, larger than the 0.2% fall in prices, so the amount of pension benefits was reduced by 0.4% in line with wages.
Although it will become a little more difficult for the elderly to make ends meet, pensions are funded by the premiums paid by the working-age generations. Adjusting the level of benefits to match the burden that can be borne by the working-age population will help stabilize pension finances. The central government should thoroughly explain the reduction in the benefits to the public and ask for their understanding.
The pension system is a two-tiered scheme comprising the national pension program for which all people are eligible, and the employee pension program for which salaried and other workers are eligible.
In many cases, people who work for a short time such as part-time workers are not eligible for the employee pension program. With the latest revision of pension benefits, the full monthly benefit for a person who has paid into the national pension program will be ¥64,816. This is not enough for people in old age to live on. It is desirable to increase the number of people who join the employee pension program, in which labor and management split the premiums.
In principle, people who work for 30 hours or longer per week are eligible to join the employee pension program. Part-time workers can also join if they meet all the conditions, such as working for more than 20 hours per week and receiving ¥88,000 or more in monthly wages.
Until now, companies were required to have 501 or more employees to be eligible for the employee pension program. However, based on laws related to pension system reform enacted in 2020, this requirement will be gradually expanded to 51 or more employees from October this year to October 2024.
As a result of this reform, an additional 650,000 people are expected to become eligible for the employee pension program. If the company size requirement was eliminated, another 600,000 people would be likely to join the program.
It is necessary to consider further expanding the coverage of the employee pension program, with the understanding of the companies that pay the premiums.
In recent years, people’s work styles have become more diverse. It is vital to create a society in which people can continue to work even after they reach the age when they can receive pension benefits, depending on their health, motivation and abilities.
Currently, if a person between the ages of 60 and 64 works and their total monthly wages and pension benefits exceed ¥280,000, their benefits are reduced. In response to criticism that this system discourages people from working, the threshold for the reduction will be raised to ¥470,000 starting in April this year. Efforts must be made to widely inform people of this revision of the system.
Ensuring that everyone can work with peace of mind will lead to steady economic growth and a stable pension system.
— The original Japanese article appeared in The Yomiuri Shimbun on Feb. 15, 2022.
