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Monday, May 3, 2004

Distrust in pension framework growing

Politicians' failure to pay premiums adds to system's woes, fuels debate

Staff writer

The recent revelations that seven Cabinet ministers, as well as the current and former leaders of the largest opposition party, have been delinquent in paying their mandatory pension premiums have further fueled public distrust of the basic public pension framework.

"This has made the public start thinking (seriously) about the pension system and they are coming to realize the deficiencies of the system," political commentator Minoru Morita said.

In an effort to deflect some of the criticism, the Cabinet members implicated in the fiasco have begun blaming clerical errors and the complexity of the system for their wrongs.

But their responses only serve to highlight the defects of the current framework.

The public pension framework consists of three separate pensions that serve different occupations -- the self-employed, public servants and corporate employees.

Although lawmakers are categorized as self-employed workers, Cabinet ministers are "special national public servants." But ministers are still covered by the pension for the self-employed. Thus, some who failed to pay premiums said they mistakenly withdrew from one program, thinking they would be covered by the other after their change in status.

Ministers and lawmakers are not the only ones confused by the system. According to the Social Insurance Agency, at least 18,800 housewives have failed to pay premiums for certain periods because they were not properly registered under the pension for the self-employed.

"The system is too difficult to understand, and things that are too complex are not trusted," Chief Cabinet Secretary Yasuo Fukuda admitted during a news conference Wednesday.

Indeed, roughly 40 percent of the 18 million self-employed people and students aged 20 or older did not pay the obligatory premiums for the National Pension System in fiscal 2002, either unknowingly or on purpose.

Although the National Pension System is an obligatory scheme covering all residents of Japan, a senior government official acknowledged that "the current system (now) basically works on a de facto voluntary application basis."

The agency will send two notices urging nonpayers to join the system, but that is usually the extent of administrative action.

Given the daunting personnel costs and the huge number of people shirking their pension obligations, the agency has been reluctant to resort to legal procedures such as the forcible seizure of assets of those who have not paid premiums despite having the means. In fact, the agency had not seized properties for 13 years until resuming the practice in January.

Lack of an incentive to pay premiums is seen as another serious problem of the current pension framework. Distrust among young people, who will be obliged to shoulder greater burdens with much fewer benefits amid the rapid aging of the population, is particularly strong.

Polls show that a majority of people now have serious doubts over the financial future of the pension system. Welfare ministry statistics show that if the current pension framework is maintained, the ratio of premium to salary for the corporate workers' pension would nearly double by 2025, while that for self-employed people would rise from the present 13,300 yen a month to some 26,000 yen in that same time frame.

According to a March poll by the Mainichi Shimbun, 60 percent of respondents said they "don't trust" the public pension system, compared to 30 percent who said they do. The figure is higher among younger generations, with 81 percent in their 20s and 74 percent in their 30s saying they distrust the system.

But the same poll also showed that what people want most from pension reform is a sense of fairness in shouldering the heavy burdens needed to support the aging society.

The poll showed that 26 percent of those who actively refused to pay their premiums wanted the imbalance between burdens and benefits depending on occupation or type of household to be eradicated, higher than the 21 percent who said they wanted current benefit levels to be maintained.

Indeed, corporate workers and public servants have no choice but to pay the premiums for their respective pensions because they are automatically deducted from their salaries. However, there is currently no sure-fire way to ensure that all self-employed people pay up.

But despite criticism that government-sponsored pension reform bills currently being deliberated in the Diet fail to address such defects, the government is still trying to have the legislation enacted by the June end of the current Diet session.

The bills call for raising premiums every year to 2017 while reducing benefits, with no structural reforms.

"The (measures in) the government bills are powerless in stopping the hollowing out of the pension system," said Kazuhiko Nishizawa, a senior economist at Japan Research Institute Ltd.

The Democratic Party of Japan had proposed that the three pension systems be integrated into a single income-proportional pension to do away with the imbalance in benefits and burdens among people of different occupations.

Under the DPJ's plan, the core of the system would be funded by taxes -- mainly the consumption tax -- to better ensure that all self-employed people would be paying into it.

But as both DPJ President Naoto Kan and his predecessor, Yukio Hatoyama, have admitted to not paying their mandatory premiums for certain periods, voters may be apathetic to this counterproposal as well.

"The damage done to the DPJ may be heavier than that which the government incurred" in the nonpayment fiasco, Morita said.

List of deadbeat politicians grows

A former defense chief and five other lawmakers have added their names to the list of politicians who failed to pay their national pension premiums.

Five are in the ruling Liberal Democrat Party. They are former Defense Agency Director General Seishiro Eto of the House of Representatives, Norio Mitsuya and Yoshihisa Furukawa of the Lower House, and House of Councilors members Yoshimasa Hayashi and Shigenobu Saito.

The sixth is Soko Shimabukuro of the Independents Party.

The list of deadbeat lawmakers includes veteran politicians from both ruling and opposition parties, including Chief Cabinet Secretary Yasuo Fukuda and several others from Prime Minister Junichiro Koizumi's Cabinet, along with Naoto Kan, the leader of the main opposition Democratic Party of Japan.

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The Japan Times

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