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Japan: Govt May Raise High Earners' Pension Premiums
Source: yomiuri.co.jp
Source Date: Wednesday, October 26, 2011
Focus: Electronic and Mobile Government, Internet Governance
Country: Japan
Created: Oct 31, 2011

The welfare ministry has started discussions on raising the upper limit of the standard monthly salary--the basis for calculating corporate employee pension premiums--to secure revenues to expand the range of eligibility for the pension system, it has been learned.

The most likely plan is to create a new top premium bracket of 1.21 million yen, government sources have said. Currently, the top bracket is 620,000 yen.

In practice, the current top bracket actually applies to people earning 605,000 yen or more per month, and the new top bracket would actually apply to those earning 1.175 million yen or more per month, according to the sources.

The latter is same as the top standard monthly salary for calculating the amount of premiums for the health insurance system covering company employees.

The Health, Labor and Welfare Ministry intends to secure revenues to include short-term workers in the corporate pension system with the plan.

The ministry plans to submit the draft review plan to the Social Security Council's pension affairs subpanel, which is set to meet soon, for discussion as it plans to submit a related bill to the ordinary Diet session next year.

The plan is expected to face difficulties as there likely will be objections from high-income earners and companies whose burdens will increase, according to observers.

The standard monthly salary is calculated based on the amount salaried workers earned during the period of April to June, and is updated each year.

The premium rate is about 16.41 percent, and the costs are split between workers and their employers.

Currently the standard monthly salary is classified into 30 brackets ranging from 98,000 yen to 620,000 yen. The pension premium of workers who earn 605,000 yen or more monthly is set at about 50,900 yen, as their standard monthly salary is uniformly set at 620,000 yen for purposes of calculating the premium.

If the envisaged plan is enforced, the maximum amount of the monthly pension premium a worker has to shoulder will be about 99,300 yen.

At the end of fiscal 2007, there were about 2.35 million people whose standard monthly salary was 620,000 yen. It has been argued that the real burden of the high-income earners was too low despite the ever worsening financial condition of the pension system.

The government plans to expand eligibility for the corporate pension system to include people who work only short periods of time, such as part-time workers.

In this regard, an integrated reform plan of social security and tax systems, compiled by the government and the Democratic Party of Japan in June, clearly stipulates that the government will review the pension system's top income bracket with that of the health insurance system as a model.

It has been a basic principle that an increase in one's premiums means an increase in the benefits one will receive. But the ministry will also study a plan to secure revenues by setting benefit payments at a level lower than one corresponding to the increase.
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