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In order to make the public pension system, which supports people in their lives after retirement, sustainable, it is essential to constantly review it, including in terms of increasing burden.
The government needs to carefully explain the aims and significance of the reform it is aiming for, and gain the understanding of the public.
The Health, Labor and Welfare Ministry has announced a proposal for reform of the public pension system, based on a financial review conducted this summer. Such reviews are conducted every five years.
The largest concern in the latest financial review was the worsening financial situation of the basic pension program.
Stabilizing the balance between revenue from basic pension premiums and pension benefits would require that the “macroeconomic slide” mechanism, which controls the growth of pension benefits to keep it lower than the rise in prices and wages, be applied until fiscal 2057.
The basic pension program is the “first tier” of the public pension system, in which all people aged 20 and older are enrolled. This basic pension program, which covers part-time workers and self-employed people, is called the national pension program, and the effective reduction in the amount of benefits from this program would have a direct impact on people’s lives after retirement.
To avoid this situation, the reform plan proposes that part of the reserve funds of the employees’ pension program, which has some financial leeway and in which company employees and public servants participate, will be allocated to the basic pension.
If this is done, the finances of the basic pension are expected to stabilize in fiscal 2036, and the amount of the pension benefits is also expected to increase by about 30%.
Meanwhile, people such as company workers who will receive benefits from both the basic pension and the employees’ pension programs, can be expected to see their payments reduced for the next 10 years or so, due to the decrease in the reserve fund of the employees’ pension program.
If the financial conditions of the basic pension program become stable, the benefit to be paid out will also increase. However, some company workers may feel dissatisfied with the fact that the employees’ pension premiums they have paid are being used to “salvage” the national pension program.
It is important for the government to present specific amounts on how benefits and premiums would change.
With regard to the national pension program, former Prime Minister Fumio Kishida’s Cabinet considered a proposal to extend the period for paying pension premiums by five years, but it was shelved due to concerns about possible opposition from people such as those self-employed. If the burden is to be placed on those who receive benefits from the employees’ pension program in the future, why not reconsider extending the payment period for those self-employed and others?
Currently, if the combined amount of wages and benefits from the employees’ pension received by an elderly person exceeds ¥500,000 per month, the pension benefit is reduced. The latest reform proposal also calls for a review of this old-age pension program for those still working.
There are many elderly people who do not want their pension benefits to be reduced and therefore limit the hours they work. One aim of reviewing the program is to raise the total income level above which pension benefits are reduced, and to get people to work for longer.
However, if this program is reviewed, the amount of pension benefits will increase. How will funding for this be covered? The ministry should present specific measures.
