The news that AIJ Investment Advisors Co. lost most of ¥210 billion entrusted to it by corporate pension funds is causing great worry to many salaried workers. The Health, Labor and Welfare Ministry has found that 84 corporate pension funds entrusted their assets to AIJ. The effect of the loss is serious because many workers’ post-retirement life will be threatened. The Financial Services Agency and other relevant government organizations should carry out a thorough investigation to find out why and how AIJ lost the money. The government also must rigorously examine the situation of other investment advising companies and take necessary measures to dispel the worries of participants in the corporate pension scheme.
Japan has a two-part public pension system. The first part is “kokumin nenkin,” which mainly covers the self-employed and those unemployed. The second part is “kosei nenkin,” which covers corporate workers. The assets of the kokumin nenkin and part of the kosei nenkin are managed by the Government Pension Investment Fund; the remaining assets of the kosei nenkin managed by investment advising firms.
Retired corporate workers receive public pensions from the second part of the pension system. According to the Pension Fund Association, some 17 million people were participating in the corporate pension scheme as of the end of March 31, 2011.
According to the Health, Labor and Welfare Ministry, AIJ was managing assets belonging to some 540,000 people while more than 340,000 people were receiving pension benefits from AIJ’s asset management as of the end of March 2011. Thus some 880,000 people may be affected by the loss caused by AIJ.
In the past, investment advising companies needed to get licensed under the investment advising business law. But the law was abolished in 2007. Although the liberalization has helped increase the number of investment advising firms to several hundreds, the system to check their activities is not adequate.
They are required to submit a report on their performance of asset management once a year. But they are exempted from outside audit. The government should at least take a step to make the operations of investment advising firms transparent to corporate pension funds. The government must also make such funds employ experts to guard against investment risks.