Japan’s basic pension benefits for future generations under discussion

File photo of the Yomiuri Shimbun
The Ministry of Health, Labor and Welfare

Discussions on ways to increase the level of basic public pension benefits in view of the 2025 reform of the pension system have started.

The Social Security Board, an advisory body to the Minister of Health, Labor and Social Affairs, held a meeting of the pensions sub-committee on Tuesday for the first time in three years.

The main issues discussed at the meeting included the extension of the coverage of the employee pension insurance system to short-time workers and the period of membership required in the national pension system to receive the basic pension from age 40 to 45 years old.

The public pension system includes the national pension system for all residents aged 20 to 59 as the first pillar and the employee pension insurance system for company employees and civil servants as the second pillar.

Until now, many part-timers and other short-time workers have only been able to join the national pension system as first-pillar members.

As part of the government’s efforts to reduce the number of people who will face hardship in their old age, it has expanded the eligibility of part-time workers and other workers with reduced hours to join the insurance scheme. employees’ pension. From this month, those workers in companies with at least 101 employees are eligible, up from 501 employees previously. In October 2024, the rule will change to apply to those workers in companies that employ at least 51 people.

Many participants in the Social Security Council suggested reviewing the system so that all short-time workers, regardless of the size of the company, can join the employee pension system.

There have also been calls for employee retirement to be open to all workers, including the self-employed.

Some members of the sub-committee have proposed to increase the period of payment of contributions to the national pension scheme from 40 years until 59 years to 45 years until 64 years.

When pension reforms were implemented in 2004, a macro-economic slippage mechanism was introduced to curb the increase in pension benefits. The longer the macroeconomic slide, the lower the level of pension benefits. It was suggested at the meeting to end the basic pension benefit mechanism earlier than the currently scheduled 2046 financial year.

The Ministry of Health, Labor and Social Affairs plans to review the budgetary situation of the public pension system in 2024 and estimate the pension replacement rate. This figure is the percentage of the average salary of the working-age population that will be received in the form of a pension. As Japan’s low birthrate continues, the rate will fall below 50%.

The ministry plans to submit a bill to the Diet in 2025 on keeping the rate above 50% based on review of tax conditions and advice from the task force.

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