A sustainable pension system that can be trusted by the people must be handed down for the future. It is essential to steadily carry out reforms from the viewpoint of protecting future generations.
Discussions toward the next pension system revision have begun at a council of the Health, Labor and Welfare Ministry. It will compile a report that spells out concrete measures as early as next year.
Due to the low birthrate and the aging population, pension benefit levels are expected to fall by 20 percent to 30 percent in the future. How can this drop be reduced to secure the level that is able to sustain the people's post-retirement livelihood? This is a fundamental issue for the pension system.
A top-priority task is to strengthen the functions of the so-called macroeconomic slide system, which automatically lowers pension benefits in line with the pace of the aging of the population and birthrate decline. The system is designed to gradually curb pension benefits by setting a pension benefit increase rate, which is revised every year, slightly below that of changes in prices and wages.
This system was introduced under the pension system revision in 2004 to ensure stable pension finance, but it has so far been implemented only once. This is a result of suspension of the system's application under deflation due to concern about a possible backlash from elderly people.
Under the pension system revision in 2016, the introduction of a new method was decided under which any cut in pensions that cannot be implemented is carried over until the following fiscal year or later, and this amount would eventually be deducted together when prices and other factors rise. However, this method might not work because there will only be repeated carryovers if deflation and low economic growth continue.
In the current fiscal year, which saw the switch to the new method, a carryover occurred right from its start, giving the impression that this concern was not groundless.
Encourage longer working life
Under the existing system, pension benefits are paid out on a long-term basis calculated based on the financial resources available while pension premium levels are fixed. If the curbing of pension benefits is delayed, the amount of pension funds available for future generations will fall, causing benefit levels to drop even further.
To avoid such a situation, it is indispensable to fully implement the macroeconomic slide system regardless of the economic situation. Even if the amount of pension benefits is reduced in the near term, it will be possible to win the understanding of elderly people as it benefits their children or grandchildren. The government should strive to make the system known to the public. Politicians must also hold themselves responsible for the task.
It is also an important task to expand the application of the employees' pension scheme to include non-regular employees, including part-time workers.
The amount of benefits paid under the basic pension plan -- a common system for all the people -- is expected to be substantially reduced in the future. The situation will be extremely severe for people who do not receive the add-on employees' pension benefits or those who are given only a small amount of them.
The range of the application of the employees' pension scheme was partially expanded in October 2016, but many part-time workers and others are still excluded. There is strong opposition from companies that would see their labor costs increase, but the application must be swiftly expanded further also from the viewpoint of rectifying disparities between those workers and regular workers.
To increase the amount of basic pension benefits itself, it would be effective to extend the premium payment period.
It is also necessary to carry out reforms in line with the extension of employment. The age until which people can opt to put off receipt of benefits, with the benefit amount increasing based on the length of the postponement, should be extended to beyond 70. A system to reduce pension benefits in line with wage levels should be reviewed because it would undermine elderly people's incentive to work. The system should respond to changes of the times.
(From The Yomiuri Shimbun, April 21, 2018)
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