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Japan: Pension Reform Urgently Needed
Source: japantimes.co.jp
Source Date: Saturday, August 21, 2010
Focus: Institution and HR Management
Country: Japan
Created: Aug 23, 2010

In fiscal 2009, the premium payment rate for the kokumin nenkin pension, which is mainly for self-employed and jobless people, dropped to its lowest ever at 59.98 percent. The rate is 2.1 points less than in the previous year and fell for the fourth straight year. It is an ominous sign that the premium payment rate for people aged 25 to 29 is only 47 percent. By contrast, the premium payment rate for people aged 55 to 59 is about 73 percent.

The kokumin nenkin pension system was originally established for self-employed people. But their participation in the plan has been declining year by year. Now wage earners with one-year or longer employment, temporary employees and part-timers account for nearly 40 percent of the participants in the kokumin nenkin scheme.

Permanent workers take part in a different scheme — the kosei nenkin pension. It is safe to assume that the percentage of irregular workers among the kokumin nenkin participants is increasing. Since their wages are low, the monthly premium of ¥15,100 represents a heavy burden. In addition, people who solely rely on kukumin nenkin pension receive only about ¥48,000 a month on average, despite long years of premium payment.

Private-sector companies entrusted with the job of encouraging people to pay premiums or informing low-income people about the existence of a system of premium exemptions or reductions are not performing well. At 312 places nationwide where such companies are undertaking the task, the goal in premiums collection was achieved only at 13 locations. Drastic reform is in order. Most workers at these companies use the telephone to contact people, but only 4 percent actually visit them.

At present, some 420,000 elderly people are pensionless. It is feared that some 760,000 people will become pensionless because they have failed to pay premiums. To become eligible, one has to pay premiums for at least 25 years. The government must immediately reform the pension system, including shortening the minimum required period of premiums payment and expanding the kosei nenkin system to cover irregular workers.
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