The Japanese government believes that the increase in employment among older adults and women has improved the long-term financial sustainability of the pension system. However, it still faces the challenge of addressing the anxieties of younger generations through institutional reforms.
Specifically, the income replacement rate at the start of pension payments is expected to be lower than the current level. Efforts are needed to improve this through measures such as expanding pension coverage for part-time workers and extending the pension eligibility age.
Companies are preparing for the '100-year life' by extending the retirement age, and the government is striving to alleviate labor shortages and promote economic growth by promoting senior employment.
Japan's Ministry of Health, Labour and Welfare announced the results of its public pension financial verification on the 3rd, and there is a growing assessment that the sustainability of pension finances has improved due to factors such as an increase in employment among the elderly and women. However, in order to alleviate the anxieties about the pension system that are prevalent among the younger generation, institutional reforms that expand the base of support are essential. Companies are also rapidly advancing their preparations for the '100-year life era,' including extending the retirement age to 70, and thus, government and private sectors are jointly called upon to design new systems.
Not directly related to the article / Source: GPT4o
The most noteworthy aspect of the financial verification is the 'income replacement rate,' which indicates what percentage of current working-age income retirees can expect to receive when they begin receiving pension payments. Comparing the four scenarios calculated in the financial verification with the current level (61.2%), none of the results are better than the current level. In particular, in the scenario projecting the past 30 years, which is closest to recent economic growth, the rate is projected to fall by more than 10% compared to the current level.
One of the policies the government is promoting to strengthen the pension system is to gradually expand coverage to include part-time workers. In October of this year, the coverage will expand from companies with 101 or more employees to those with 51 or more. In this verification, the Ministry of Health, Labour and Welfare demonstrated that the gradual abolition and relaxation of eligibility requirements lead to an increase in the number of participants and an improvement in benefit levels. Expanding coverage to include all workers who work 10 hours or more per week would result in 8.6 million new participants in the Employees' Pension Insurance, and in the scenario projecting the past 30 years, the income replacement rate would rise to 56.3%.
Another option is to work while healthy and delay receiving pensions. Extending the required contribution period for the basic pension insurance from the current 40 years to 45 years would raise the income replacement rate to 57.3%. However, extending the pension commencement age requires fostering an environment that promotes employment among elderly individuals who are willing to work.
Meiji Yasuda Life Insurance plans to extend the current retirement age of 65 to 70 starting in fiscal 2027, which, if realized, would be the first such case among major financial institutions. According to a recent government survey, only 30% of companies offer employment opportunities up to the age of 70 to those who desire it, and it is necessary to enhance efforts to encourage such proactive efforts.
The government intends to publish best practices to encourage more companies to reconsider job-based retirement ages and retirement systems. The growth strategy 'New Capitalism Implementation Plan,' which was decided at the Cabinet meeting in June, also states, "To prevent capable young people from feeling discontent, provide information on how to treat senior citizens based on their skills." Employment of seniors also addresses labor shortages. A series of institutional reforms to ensure the sustainability of pensions also contributes to the growth of the Japanese economy, which is facing labor shortages. (Fumi Miyazawa)