October 13, 2011

JAPAN: Pension benefits may start as late as ages 68 to 70

TOKYO, Japan / The Japan Times / Life in Japan / October 13, 2011

Work longer for elusive benefits

Ministry eyes 70 as pension eligibility age

By Jun Hongo, Staff writer

While the need to address the ballooning costs of social security is universally recognized, experts were divided Wednesday over whether the welfare ministry is on the right track with its proposal to raise the age at which employees start receiving their pensions.

The welfare ministry proposed on October 11 that workers enrolled in the employee pension program begin receiving benefits as late as ages 68 to 70 instead of the current 60.

The scheme is aimed at stabilizing the pension system and incentivizing workers to postpone their retirement.

"Society is aging at an extremely fast pace," said Keiichi Fukuyama, executive director at the government-affiliated Research Institute for Policies on Pension and Aging. "In order not to crash the pension framework, delaying the age for receiving pension benefits is inevitable."

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Fukuyama added that older workers should be ready to support the social security system instead of becoming its beneficiaries.

"In my opinion, the so-called elders are not that old — they are still very energetic," Fukuyama said.

The public pension system is divided in two, with the "kokumin-nenkin" national pension program, which provides benefits to all citizens, and one for employees known as "kousei-nenkin." Once touted by the government as an "arrangement that will last 100 years," the system is set for an overhaul in less than a decade.

According to welfare ministry statistics, the ratio of working age people to pensioners was above 40-to-1 in the late 1970s. But that number has plummeted below 2.50 since 2009, meaning there are fewer than 2.50 workers supporting a single retiree.

Other countries have also moved to delay the pension age of eligibility, including Germany, which will raise the age in stages from 65 to 67 beginning in 2012, due to demographic changes.

In Japan, the economy is another factor to consider, RIPPA's Fukuyama noted.

Illustrative photo by courtesy of news-worthy.info

The original budget plan did not envision a decline in the consumer price index brought about by Japan's current deflationary economy, meaning that despite an overall fall in prices, the pension benefits have remained relatively high.

"Revising the scheme under such a scenario is inevitable," Fukuyama said.

The ministry also discussed hiking in pension payments for recipients with a steady income.

To encourage workers to postpone retirement and contribute as part of the workforce, the ministry is proposing allowing employees making up to ¥330,000 or even ¥460,000 per month to receive the full pension payment, rather than reducing payouts for those making over ¥280,000 per month as now.

Kuniji Higashitaki, representative of the Tokyo-based nonprofit organization Life Venture Club, said changes in the pension system were expected and a hike in benefits for working seniors is a welcome move.

While many retirees might have to wait longer for their benefits to kick in under the new proposals, seniors "shouldn't be depending on pension payments and figure out ways to survive in the environment on their own," Higashitaki, 76, said.

Life Venture Club, which was founded in 1985 and has about 500 members ranging in age from their 30s to 80s, promotes working and remaining active throughout one's life.

Lectures given at the group's meetings cover such topics as how to manage one's finances to avoid being dependent solely on pension income.

"We are already at a point where in Japan, we cannot rely for our livelihoods on pension benefits alone," Higashitaki said. "One must consider how to add more, add that 'plus alpha' somehow."

While some say delaying retirement will make it harder for younger people to land jobs, RIPPA's Fukuyama said that is not necessarily the case.

"Providing jobs for the young is important, but having veterans keep their professions won't exactly push them out of the market," he said. "The elderly have skills and experience, while younger workers are definitely more vigorous."

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