Pension cut set to match with deflation

Reduced state outlays to be done in phases

Kyodo

A Lower House committee approved a plan Wednesday to reduce pension payments that the government has kept unchanged despite declines in consumer prices.

Lawmakers from the Democratic Party of Japan, Liberal Democratic Party and New Komeito voted to implement a 2.5 percent reduction in three phases from October 2013 to April 2015.

While the panel also approved a plan to provide a monthly payment of ¥5,000 to low-income pensioners, benefit reductions may draw criticism from current recipients who will have to bear reductions as well as workers who are currently paying into the plan but will eventually be hit by benefit cuts.

A revision to the National Pension Law and a bill to provide benefits to support pensioners are expected to be enacted during the current Diet session through Nov. 30, after approval by a plenary session of the Lower House on Thursday and later by the Upper House.

Under the revision, a 1 percent reduction will be made in the first phase starting next October. An additional 1 percent cut will be implemented in April 2014, followed by a 0.5 percent reduction in April 2015.

This means that next October, the monthly basic “kokumin nenkin” payment will be trimmed by ¥666 to ¥64,875. The reduction amount will eventually expand to ¥1,675.

This will translate into a cut of ¥2,349, to ¥228,591, per month for a couple comprising a husband who has worked 40 years and a full-time housewife covered additionally by a “kosei nenkin” corporate pension plan. The cut for such a couple will eventually grow to ¥5,900.

Public pension benefits are supposed to be revised every year based on the consumer price index. But the current benefit levels are set 2.5 percent higher than they should be out of consideration for advanced-age pensioners. The proposal aims to dissolve the exceptional treatment. Some ¥7 trillion is estimated to have been paid “additionally” as a result.