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An increasing number of people do not manage pension premiums paid by their employers and neglect the funds after switching jobs. The central government should raise awareness of the importance of corporate pension programs and improve the current situation.
The nation’s pension system includes pension programs for employees established privately by corporations on top of a public pension scheme. As of the end of September, funds were reportedly left unmanaged by about 1.12 million people in corporate-type defined contribution pension programs, a private corporate pension scheme.
It is likely that such people did not go through the necessary procedures to transfer funds to another program when they changed jobs or became independent. The total amount of funds left unmanaged reached about ¥260 billion.
According to the National Pension Fund Association, the number of people who do not manage their pension assets has increased by about 50% compared to the figure in fiscal 2017. The rise in the number of people who change jobs is thought to be behind the increase.
With the declining birth rate and aging population, the level of public pension benefits is expected to decline. The importance of corporate pension programs as a support net after retirement is growing. It would be a shame if working generations were to miss out on precious asset-building opportunities without realizing them.
In a corporate-type defined contribution pension program, employers pay the premiums and employees manage the funds. Many companies have introduced such a system in the sense of retirement money.
In principle, assets under corporate-type defined contribution pension programs cannot be withdrawn until people turn 60. If employees leave jobs before then, they need to transfer their assets to the individual-type defined contribution pension plan (iDeCo) or similar pension plans in which they set aside assets themselves.
If they fail to go through the transfer procedures, their assets will be automatically transferred to the National Pension Fund Association. In addition to the cost of the transfer, a fee of about ¥600 per year is deducted, and the assets will gradually diminish.
There may be many people who do not understand how this system works.
The association issues annual notices to eligible people to encourage them to conduct the transition procedures. However, there may be cases in which people think it has nothing to do with them and do not perform the procedures.
It would be advisable for the association to repeatedly send reminders about the transition procedures to people who do not submit a response. It is absolutely necessary to make use of various media to publicize the disadvantages of not going through the transition procedures.
The role of corporations is also important. When an employee leaves a company, the employer is required to explain to the employee the transition procedures under the corporate pension program. It is hoped that companies will provide more opportunities for employees to learn about the system through training sessions and other means.
With the emergence of the “era of 100-year life spans,” people are urged to design their lives appropriately for retirement, even when they are young. It is also vital for people in pension programs to take an interest in asset management.
