Japan’s basic pension benefits for future generations being discussed

Yomiuri Shimbun file photo
The Health, Labor and Welfare Ministry

Discussions on ways to raise the level of basic public pension benefits ahead of the 2025 reform of the pension system have started.

The Social Security Council, an advisory body to the health, labor and welfare minister, held a pension subcommittee meeting for the first time in three years on Tuesday.

The major issues discussed at the meeting included extending the coverage of the employees’ pension insurance system to shorter-hour workers and the required enrollment period in the national pension system to receive the basic pension to 45 years from 40.

The public pension system has the national pension system for all residents ages 20-59 as the first tier, and the employees’ pension insurance system for company employees and civil servants as the second tier.

So far, many part-time and other shorter-hour workers have only been able to join the national pension system as insured persons in the first tier.

As part of the government’s efforts to reduce the number of people who will face difficulties in their old age, it has been expanding the eligibility for part-timers and other workers on shorter hours to join the employees’ pension insurance system. From this month, such workers at companies with at least 101 employees are eligible, down from 501 employees. In October 2024, the rule will change to apply to such workers at firms that employ at least 51 people.

Many at the Social Security Council meeting suggested that the system should be reviewed so that all short-time workers, regardless of company size, can join the employees’ pension insurance system.

There were also calls for the employees’ pension to be open to all workers, including freelancers.

Some subcommittee group members proposed changing the period for payment of national pension contributions from 40 years through age 59 to 45 years through age 64.

When pension reforms were implemented in 2004, a macroeconomic slide mechanism was introduced to curb the increase in pension benefits. The longer the macroeconomic slide is implemented, the lower the level of pension benefits. There was a suggestion at the meeting to end the mechanism for the basic pension benefits earlier than the currently scheduled fiscal 2046.

The Health, Labor and Welfare Ministry plans to examine the fiscal state of the public pension system in 2024 and estimate the pension replacement rate. This figure is the percentage of the working-age population’s average wages that will be received as pension. As the low birth rate in Japan continues, the rate will fall below 50%.

The ministry plans to submit to the Diet in 2025 a bill related to maintaining the rate above 50% based on the examination of the fiscal conditions and the opinions of the working group.