EDITORIAL: Pension reforms must ease anxieties about life in old age

The government conducts a fiscal review of the public pension system every five years based on population shift projections and economic forecasts.

The results of the latest review, disclosed on Aug. 27, reminded us anew of the harsh reality ahead: inevitable cutbacks in pension benefits as the population keeps aging and shrinking.

The prospect calls for serious discussions of system reforms that may help ease the pain.

The pension benefit level, or “pension-to-wage ratio,” equals the percentage of the amount of pension payment to the average income of the working generation.

For the current fiscal year, the level stands at 61.7 percent. But about 30 years from now, it is projected to fall to between 50.8 percent and 51.9 percent, even with economic growth.

The basic pension, in particular, is estimated to shrink by about 30 percent because a lengthy adjustment period is required to keep the benefits under control.

How will the government allay people’s worries about financial instability in old age, even if the pension fund becomes more stable?

The government intends to make it easier for senior citizens to keep working for as long as they wish, expand the system to increase their pension payments according to the number of years they wait before they start collecting, and review the system under which the benefits of working seniors will be reduced according to the incomes they earn.

Obviously, trying to expand the working population is vital to the health of the public pension system, but that alone will never be enough to allay the public’s worries about life in old age.

The most urgent task now is to make it easier for part-time workers to enroll in “kosei nenkin” or employees’ pension programs for those employed by private corporations.

This will not only guarantee better coverage for the part-time workers themselves but will also prove effective in controlling the decline of the basic pension level, according to a projection made in the latest fiscal review.

The task deserves top-priority handling, although due consideration should be made for small and medium-scale businesses that will have to bear greater insurance costs.

Another effective measure for stabilizing the basic pension system would be to extend the duration over which enrollees must pay their premiums, from the current 40 years in principle to 45 years.

At present, they pay from the age of 20 until they reach 60. Under the new system, they will keep paying until they are 65.

However, this switch will necessitate an examination of the source of the government’s share of the basic pension funding.

Some opposition parties argue against setting any controls on basic pension benefits and insist on guaranteeing a set amount. However, that will raise no small challenge, including the question of where to seek the funding.

It is not realistic to depend entirely on the pension system to solve all problems. A much more realistic approach would be to deal with the issue of poverty more broadly, such as through the government’s welfare policy.

The results of a fiscal review of the public pension system are normally released about three months after the adoption of economic projections on which the review is based.

But this time, the unveiling of the results was greatly delayed from the initially indicated timing of early June.

This invited criticism that the government and ruling coalition intentionally delayed the release to avoid any undesirable impact on the Upper House election in July.

The very fact that such an accusation was made has hurt the reliability of the pension system.

The government should consider setting rules for the timing of the disclosure of the results so that it will not be affected by political circumstances.

--The Asahi Shimbun, Aug. 28