Face up to the pension crisis

Japan must prevent its pension system from being weakened by the low birthrate and the graying of the population, the pension records fiasco, the spread of poverty and the worsening employment situation. Yet, political parties’ pension-related proposals contain many obscure points and need elaboration.

In fiscal 2008, the premium payment rate for Kokumin Nenkin (national pension) — a public pension system for self-employed people, part-time workers, jobless people, etc. — dropped to a record 62.1 percent. Even if people pay Kokumin Nenkin premiums for the full 40 years, they receive only about ¥66,000 a month. An average Kokumin Nenkin pensioner receives about ¥48,000 monthly. This amount is too small. It is also feared that 1.18 million people will be pensionless in the future.

The Liberal Democratic Party proposes taking concrete measures within three years to support pensionless or low-pension people, among other things. Komeito, the LDP’s coalition partner, proposes adding a certain amount of money to low-income people’s Kokumin Nenkin pension. The two parties jointly propose shortening the minimum number of years for which people must pay premiums to become eligible for Kokumin Nenkin benefits — from the current 25 years to 10 years.

To implement the LDP’s proposal, a large fund may be necessary. Even if the obligatory premium payment period for pension eligibility is shortened, people may give up paying premiums due to unstable employment and low income.

The Democratic Party of Japan proposes introducing a guaranteed monthly pension of ¥70,000 by using revenues from the consumption tax and income-scaled premiums to raise the pension above the guaranteed amount.

Since the DPJ proposal means a total change of the present system, the party says it will take 20 years for the new system to be established. It is unclear how the DPJ will support pensionless or low-pension people during the transition. Since pensions are such an important issue, all the political parties should put their heads together to work out an optimum solution.