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Monday, Jan. 31, 2011

EDITORIAL

Shoring up the 'basic' pension

The government is trying to reform both the social welfare system and the tax system as Japan's financial condition deteriorate. Before discussing overall changes, it must strengthen the "basic" portion of pensions.

Self-employed people, part-time workers, unemployed people, etc., participate in the kokumin nenkin pension system and only receive the basic portion. Company employees receive the basic portion plus benefits from the kosei nenkin pension system in which they participate.

Under the pension reform of 2004, the monthly premium for the kokumin nenkin system was to rise by ¥280 each year through fiscal 2017 when the amount will reach ¥16,900. But because the consumer price index fell 1.4 percent in 2009 from 2008, the monthly premium will go down by ¥80 from ¥15,100 in fiscal 2010 to ¥15,020 in fiscal 2011.

One might think that this will help decrease arrears in the payment of premiums, thus increasing the reliability of the pension system. But the price fall will also lead the monthly benefit in the kokumin nenkin system to drop by ¥200 from the current ¥66,008 for a person who continued to pay the premium for full 40 years. (The average benefit is only about ¥44,000.)

One might assume that if consumer prices rise, the pension benefit will increase accordingly. That's not the case. A trick of the 2004 pension reform is that even if consumer prices rise, the pension benefit won't rise by the same percentage. So, there is a strong possibility that the basic portion of pensions won't provide the minimum social security net for retired people.

There is more bad news. The actual payment rate for kokumin nenkin premiums during the half-year from April 2010 fell to a record low 55.98 percent — down 1.57 percentage points from the same period a year before.

The government should tackle in earnest such issues as increasing the government's burden in the payment of the basic portion benefit from the current 50 percent, letting irregular workers join the kosei nenkin system and allowing premium payments that are many years in arrears. The most important thing is to establish a measure that minimizes the possibility of people going without a pension.



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