July 1999 Public Pension Reform of 1999
Public Pension Reform of 1999
Government of Japan (Ministry of Health and Welfare, Ministry of Finance)
The share of the national treasury for the above expenditure will be increase to one half in the year 2004 from the current level of one third.
Raising the starting age of benefits payment for old-age benefit of Employees' Pension Insurance (earnings related part)-from April 2013 Exempting enterprises from payment of employer's portion of insurance fee during child care leave period-April 2000
Introduction of a gross earnings (including bonus) method for the calculation of contribution levels-April 2003
More flexible management of public pension reserve funds (schedule to be determined together with that of fundamental reform of fiscal investment and loan system)
Need for restraint of excessive burdens on future working generations
Low fertility rate which declined very rapidly and is expected to stay at the present low level for the near future.
Low rate of growth since the oil shock and the long-term recession due to the burst of the bubble economy in the 1990s. Strong opposition from the business against incresing their contribution.
Previously, the public pension reserve fund was managed by the Ministry of Finance using primarily a low-return government bonds. After the reform, the Ministry of Health and Welfare will manage the fund and MHW will utilize private market to get a higher return.
Public Pension is to be reviewed in every 5 years.
General employees
The objective of the reform is to make long-term pension management stable by trying to set appropriate benefits and burdens considering the predicted aging of society and decrease in the birth rate. In particular, the reform will attempt to lower future benefit levels to avoid excessive burdens for future working generations.
Restraint of pension levels (Proposal to cut 5% off earnings related part; change in the method of benefit adjustment from wage increase to price increase only.) Raising the starting age of benefits payment of the earnings related part from 60 to 65. Introduction of gross earnings (including bonus) method for the calculation of contribution levels
Exempting enterprises from payment of employer's portion of insurance fee during child care leave period
More flexible management of public pension reserve funds
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Labor unions (Concerns regarding employment until the starting age of benefits payment and post-retirement living expenses) Amid conditions of long-term recession, the main object is to maintain short-term employment. Economic organizations (Unsatisfied that the requests to increase the burden on the national treasury is not being recognized) Many are of the view that the increase of the burden on the national treasury would be financed by raising the consumption tax. They face a dilemma that decrease in consumption due to higherr tax will prolong the recession.
Academics (Concerns about the trends toward complete financing of pension through taxes) The question of whether to secure a source of revenue for the social security system through social insurance premiums or through taxes is being debated by scholars. Some feel that social insurance premiums and taxation are both nondiscriminatory to the people. Others support the method of social insurance premiums because they place importance on the clarification of the right to receive benefits.
Corporate retirement systems, employment policy for the aged Tax systems (Review of ratio between direct and indirect taxes) Corporate pension system (Handling of tax-qualified pensions, Japanese-style 401k) Family policies (Employer responsible portion of child allowance)
Yet to be implemented
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