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  • Asahi on future of Japanese pension plans: oldies below poverty line

    Posted by Dr. ARUDOU, Debito on June 2nd, 2009

    Handbook for Newcomers, Migrants, and Immigrants to Japan\Foreign Residents and Naturalized Citizens Association forming NGO\「ジャパニーズ・オンリー 小樽入浴拒否問題と人種差別」(明石書店)JAPANESE ONLY:  The Otaru Hot Springs Case and Racial Discrimination in Japansourstrawberriesavatar

    Hi Blog.  Here is the proposed future for those of us paying into our nation’s pension plan.  Read and weep.  Considering Japan’s unofficial poverty line is about 200,000 yen a month, people who retire are forecast to become just that:  impoverished.  Arudou Debito in Sapporo

    =====================================
    New pension data, same grim outlook
    THE ASAHI SHIMBUN 2009/5/26, courtesy of TC

    http://www.asahi.com/english/Herald-asahi/TKY200905260070.html

    The average household that starts receiving public pension benefits this fiscal year will see the payment level drop to about 40 percent of average working household incomes in 20 years, the welfare ministry said.

    For households consisting of a man living alone or a working couple, the amount of benefits from the kosei-nenkin pension program for company employees is already below 50 percent of the average income when they first receive payments, the ministry’s estimates show.

    The Ministry of Health, Labor and Welfare’s model household comprises a company employee on an average income who has subscribed to the pension program for 40 years, and a wife of the same age who has been a homemaker since marriage.

    In February, the ministry concluded that a model household would be able to secure pension benefits of at least 50.1 percent of the average income of working households in the first year of payments.

    The ministry’s latest estimates include changes in annual benefits over 20 years.

    If the average household begins receiving benefits in fiscal 2009 when the couple reach the age of 65, the payments will be 223,000 yen a month, or 62.3 percent of the average income of working households.

    When the couple become 85 years old, the pension amount will be 199,000 yen in terms of current values, or 43.2 percent of the average working household income.

    The ministry’s estimates in 2004 showed that a model household would start receiving pension benefits equivalent to 57.5 percent of the average income.

    When the couple reach 85 years old, the ratio would be 41.8 percent, according to the 2004 estimates.

    Therefore, the latest estimates represent a nearly 5-percentage-point rise in the first-year benefits of the model household.

    However, the rise was mainly led by the current decline in household income.

    After households begin to receive their benefits, the ratio changes each year depending on price movements.

    The ministry’s latest estimates are based on the assumption that consumer prices will rise by 1 percent annually while average household income will increase by 2.5 percent.

    The expected decline in the ratio of benefits over the years is also a result of 2004 legal revisions intended to curb pension benefits to prevent the rapidly aging society from draining welfare coffers.

    A household of a couple who both worked full time receives first-time pension benefits of 279,000 yen in fiscal 2009, or 48.3 percent of the average income of working couples, according to the latest estimates.

    For a household of a man who has remained single since he joined the pension program, the corresponding figures will be 157,000 yen, or 43.9 percent.(IHT/Asahi: May 26,2009)

    ENDS

    17 Responses to “Asahi on future of Japanese pension plans: oldies below poverty line”

    1. Drew Says:

      “Hi Blog. Here is the proposed future for those of us paying into our nation’s pension plan.”

      Haha, if only my proposed future was so nice regarding my pension plan contributions. I’m just going to get 500,000 yen and a note “thanks for the free money, sucker.”

    2. HO Says:

      I do not think “national” pension plan should provide any more than the minimum. It is not the job of the government to let retirees live luxuriously at the cost of taxpayers.

      199,000 a month “national” pension is not that bad. Retirees have their own savings and “taishokukin” on that national pension.

      – And here we have HO again, citing his writings and figures, and completely ignoring the human equation… Go meet some of the increasing numbers senior citizens who live below the poverty line and find out how they got there.

    3. AWK Says:

      If you don@t plan to stay here forever as myself, there is no need to pay to J system whcih at the end will rip you off. (those leaving) How about programs on JTV about Japanese who receive only 80,000 or 100,000yen a month and they have to still contribute to their “sick” NHI system? How about JTV program in which taxi driver said that when he retires he is going to be homeless because his retirement won`t be enough to live on. So…where are those who gets 200,000? I think is quite nice money, first of all when you live in country side.

    4. Mark in Yayoi Says:

      Debito, forgive me, but I have to agree with HO. A retiree isn’t getting much less than a 22-year-old new employee, who has to work full time (or, in many cases, more than full time, as the company keeps him for 12-14 hours a day) to earn that money, plus has much higher expenses — rent, for one! — and will soon have kids, as opposed to the elderly whose children are already grown and independent.

      I also have a problem with the alarmism that the government seems to want to generate with these figures. 199,000 isn’t the actual amount that a retiree will be getting 20 years from now; that’s the current value of what 233,000 will be assuming 1% annual inflation.

      And then they predict that people’s earnings will continue to climb at an even faster rate. That’s a good thing! Of course the ratio of that pension to the average *future* person’s monthly earnings is going to fall — you’re predicting steady increases in the average person’s monthly earnings!

      If today’s children really put their noses to the grindstone when they grow up, developing fantastic technology and becoming ten times more productive, earning ten times what their parents did, would their freeter parents see a big decrease in the value of their pension compared to what their kids produce? Of course. As it should be.

      For me, the only ratio that matters is the ratio of what you get compared to what you put in. And I fear that even conceding a 0% rate of return on the money you invest, today’s young people will get much less back than they had to pay. There’s no law against inter-generational theft, and I suspect that the baby boomers will happily sell their juniors into pension-slavery so that they can continue to live well.

    5. adamw Says:

      personally i think these figures are far too optimistic,the actual numbers will be lower (and where they got these inflation ,future wage predictions from I would like to know )
      ,but if it were to be true
      i agree with ho and mark- i think 20man is very good indeed for doing absolutely nothing.
      as this money is going to be given to them from the likes of me who wont get anything at all when we reach retirement age , i consider it to be legalised stealing…
      when you further consider that future generations have to deal with the national debt being over 200% of gdp (further stealing from future generations)then the resentment gets bigger.added to this the current retirees want their pensions but are too racist to let people in who will actually work to pay for it then im sorry but no sympathy,only great anger.
      the only thing i can see in mitigation is that barriers to continuing work are far too high for the aged-this is a situation that needs to be urgently addressed.
      i dont understand the mindset that you reach 60/65 and you retire and someone else pays for you-this is unsustainable and a thing of the past…if 20man aint enough for you do some work like the rest of us

      – I always find it amazing when people begrudge the aged getting something back on their investment. They did contribute to the fund for decades, remember. The reason is, it’s uncertain whether they’ll get the same amount as older people now (if it was the same amount, or more, then complaints would evaporate). So they blame the old (as opposed the the current — not yet pensioned — fund managers) for getting what they can now. It’s the opposite of the general situation, where the young want to eat the old. While they can, I guess.

      But what you do to the elderly now will happen to you eventually, so think hard about this.

    6. adamw Says:

      “But what you do to the elderly now will happen to you eventually, so think hard about this.”

      no it wont at all and thats exactly the point -its completely the opposite – we are paying now for the elderly but we will get no return for our money.

      your comments dont make any sense. “So they blame the old (as opposed the the current — not yet pensioned — fund managers) for getting what they can now.”

      what does this mean?? you are saying we should be happy that they are taking money and retiring early(we will have to work at least another 10yrs to pay for it) on our money ,and we wont get a penny??
      and this is before even starting on the 200% nat debt relative to gdp future generations are saddled with

      sorry,but if you look at the numbers- the pension system in unsustainable ,its a giant ponzi scheme,so please dont suggest that we should show sympathy for people on 20man a month retirement pay..
      asahi shinbun says this is a grim outlook – it isnt at all,its a very rosy picture being painted when the reality will be far worse-particularly for generations following into retirement.

    7. JP Says:

      Most of these arguments have merit, but the one thing that seems to be missed here is this:

      When people retire they often do not have the opportunity to “earn” money any longer, due to age, physical ability, etc. They are dependent on what the gov’t chooses to return to them in a pension payment from a pension plan that they were required to support for 40 or so years; and any wealth/property that they were able to accumulate during their lives. The middle class and above in Japan will most likely have enough to get by, this includes a majority of the population. The real problems are revealed when we start looking at those who were unable for a myriad of reasons to accumulate any wealth during their life times and are completely dependent on the government. If one owns nothing and is required to fund a life for 2 on 200,000 yen a month, even in relatively good health, is that enough? Is it their fault that they can’t support themselves, not necessarily.

      I guess a more important point here is that we all know that the system is doomed to fail, but we continue to be selfish and think like “what do i get out of the system”. Maybe we all need to start thinking about how can we create a system where everyone benefits, because if we don’t we will all end up paying for those that the system doesn’t support. For Example, if homelessness becomes a problem that affects a significant portion of the population, the government will be forced to divert funds to address the homelessness, thereby causing all taxpayers to pay for homeless programs.

      There is no way to avoid the fact that we are members of this society and we do not exist in isolation! Or more famously known by “we are all in the same boat”.

    8. Asterisk Says:

      Sorry to jump into this late, but:

      In most places, old age pension is a floor of support. No one whould be looking at this number and asking whether it is enough to replace the earnings while working. The idea has always been that people will also plan for themselves to cover the difference.

      I think in Japan the pension monies are given a tax-favored treatment. So that should be money net to the pensioner.

      Second, most countries only adjust the pension at retirement by the consumer price level. But contributions are indexed to the average wages that people earn. As a result, the value of the pension throughout retirement does not keep pace with wages. (I know that is the case in America.)

      To me, the bigger problem in Japan is non-participation. The system is set up where the youngsters are supposed to be paying those kokumin nenkin coupons every month at the combini, to build up 480 paricipating months over the contribution life of the program. In reality, many don’t — and can’t!

      The contribution should really come out of wages, whether it’s the pension part of kosei nenkin or kokumin nenkin.

      Second, for the foreigners: most of the main countries have totalization treaties with Japan, where contributing here will be a fractional check back to you in the distant future. It is a life annuity, and like every life annuity written, there is no guarantee what comes back. It is meant to cover the contingency that you will be around longer than you think.

      And as for actual cash flow, yes: the pension premium you pay now is funding some old woman in Akita or Sumida-ku. But you are here and guess what? It was that generation that built up modern Japan for you to fly into and complain about. So this is your contribution in, your “pay it forward”.

      I support these programs and am confident that something will be there in the future.

    9. level3 Says:

      The amount of money will always be up for debate. And the amount of money given will always be a balance between what politicians think they can get away with as far as bribing elderly voters sufficiently vs. going into deeper debt. But quibbling about the pension amount doesn’t address the baic problem of this scheme.

      When these retirement plans were started, they based the whole thing on the fact that the average life expectancy and the retirement age were about the same. Half of the people paying into the system would never collect anything, because they would be dead. So, it “worked”.

      And as long as the economy keeps growing and/or the government keeps borrowing money, the system could be squeezed to yield more bribe money for elderly voters. Unfortunately, we were even borowing money in the good times. But as the life expectancy increased (and government budgeting techniques changed to raid and totally wipe out the “pension savings” to fund more concrete projects) it all became a Ponzi scheme, wealth transfer from the young to the old.

      Now, the average Japanese can expect to live 15 or 20 years beyond retirement age.
      How is it fair that someone who paid maybe 10% of their salary for 40 years should get a quite nice 100% pension for 15, 20 or 25 years? Surely they are getting more out than they paid in.

      It can’t work. It doesn’t work. Only ridiculous borrowing keeps it afloat.
      The only rational justification for those above who believe they’ll get their fare share down the road is to hope that the system will collapse only AFTER they die.

      And if you want to be paranoid, national pension schemes plus national cradle-to-grave health care can lead to some perverse disincentives in the realm of care for the elderly if things get desperate. In Japan’s case, government ownership of tobacco companies seems to be part of the “solution” to the pension problem.

      But hey, look at it another way, for people with Japanese parents, when the parents die, they get back whatever pension money Mama and Papa didn’t get around to spending (and for any 85-year-old who doesn’t require 24-hour nursing care while only having to pay 10% of hospital fees, one could assume that’s quite a bit) How does estate tax work in Japan?

      But again, the gaijin can’t cash in on this part either.

      (And let’s save the “They built Japan, so they deserve young peoples’ tax money!” No they don’t. They got paid salaries while they built Japan, it was not a volunteer effort..and besides if we want to be thowing money to that generation for “building Japan” does that also mean we shouldn’t give ANY pension to the generation that participated in the war, because they “destroyed Japan”? And should we make a list of certain years in which certain generations are deemed politically good or bad, and determine their “deserved” pension accordingly? So do people who worked during the Bubble deserve more pension or less? Confusing.)

      – Source on founding the system on the belief that half the subscribers would be too dead to collect?

    10. Mark in Yayoi Says:

      – Source on founding the system on the belief that half the subscribers would be too dead to collect?

      Debito, this is just for the US, but:

      http://www.infoplease.com/ipa/A0005148.html

      In the 1930s when the Social Security system began, life expectancy at birth was in the 60s.

      Of course, in those days, premiums were very small, and everyone was well aware that Scial Security was only meant to be a supplement to income that they would have prepared for themselves.

      Then again, it was easier to save money then, because the government wasn’t taking as much of your earnings when you were still working.

    11. Asterisk Says:

      to Level3:

      I am simply pointing out that there is a “pay it forward” involved.

      The people who came before deserve to get something, simply for the fact that they (in general) they were giving into this world before you. They do not get everything, simply about $600 basic allowance and then whatever came out of the earnings they made while employed.

      This is not a whole hell of a lot. And for the NJ giving in, unless they are “lifers”, it is very little. But I don’t think it’s such a strange notion that elders should be given something by way of respect, simply because they put in the time.

    12. adamw Says:

      asterisk,

      not at all.these people have already had their money-the nat debt being 200% of gdp means that they are stealing from future generations who are saddled with the debt and the colossal interest payments.furthermore,there is company retirement lump sum payment system which will not exist for younger generations ..
      this is before even getting on to the system of pensions-how can you possibly claim its fair for
      young people to be forced to pay into a system they wont get anything out of when they come to retirement age??this is not a “pay it forward” system at all.

      you bring up nj ,which i dont know is necessarily relevant as young japanese are being exploited as well here,but as debito has mentioned many times this is another form of thievery as anything between 3-25yrs means as an nj you get nothing..

    13. Asterisk Says:

      Adamw,

      You are right that Japan’s debt-to-GDP is about (gross) 200%. But a lot of this debt is owed between government agencies, and I think the net number is lower.

      Virtually none of it is owed outside of Japan. So it is debt that is owed between Japanese citizens (residents?) in the end.

      It is entirely different than “generational debt”. It is debt of the taxpayer owed to the lender. The old people have not somehow stolen this from the younger, unless you believe that money people have over in savings has somehow been stolen from someone else.

      Many people throw out that 200% GDP number, and really they want to say that they don’t feel like paying the pension coupon book.

      You are wrong that anyone paying premium “between 3-25yrs . . . get[s] nothing”. For most NJ who aren’t permanent residents or special permanent residents, there are so-called totalization treaties where the money paid to Japan is added to the record of the home country. This is true now of the U.S., Canada, Australia, France, maybe even South Korea. In most cases, if you make even 1 month contribution, they have a record.

      So someone from Australia, Canada or the States could be paying 5 years, they will get fractionally the value of that 5 years compared to the whole, so long as they qualify with time in both countries. (So 20 in America, Canada, etc. would be added to the 5 in Japan to make 25.)

      For the U.K., they have some kind of exemption worked out becuase the U.K.’s system is entirely different.

      So for most English speaking NJ’s, there is no issue about this and it is simply people don’t want to pay the nenkin, even though they are supposed to.

    14. adamw Says:

      not at all.
      im not sure why you think that as its mostly domestic debt it doesnt matter.
      this debt has to be serviced-and the money to pay for this comes from current generation taxes ,
      and reducing spending on current services to pay for services other generations have consumed.
      j gov also intends to try to reduce the debt (again by raising taxes ,reducing services) thus
      current and future generations get the shaft.
      regarding the pensions,of course people dont want to pay the nenkin.
      if they were going to get money out at the other end there would be no problem in paying,but
      as already discussed at length the chances of that happening are 0,so of course people do not want to pay.you may as well burn bank notes every month.if you can find a rational person who wants to do that with their hard earned money let know

    15. KG Says:

      Somewhat related to the thread but this should be an interesting case to follow…

      http://www.japantoday.com/category/national/view/chinese-woman-seeks-right-to-apply-for-welfare-benefits

      Chinese woman seeks right to apply for welfare benefits
      Saturday 20th June, 03:28 AM JST
      OITA —

      A Chinese woman with permanent residency in Japan filed a suit Friday over a local government’s refusal to reconsider its decision to reject her welfare application on the grounds that foreigners do not posses such rights.

      The 77-year-old, who grew up in Japan and resides in Oita Prefecture, filed the suit with the Oita District Court seeking to overturn the Oita prefectural government’s decision, claiming that such refusal based on her nationality violates equality and right to life as guaranteed by the Constitution.
      © 2009 Kyodo News

    16. Bill Says:

      I heard that there was an amendment to the new immigration law to the effect that foreign residents will be required to have national insurance and pension arrangements in place in order to get a new Visa. Can anyone confirm this? My understanding is that if you’ve never been in the system, as will be the case with most people who came to Japan with Eikaiwa, back payments can be payable. Anyone care to comment?

    17. Mumei Says:

      adamw,

      Thanks for the info regarding the totalization treaties. I am still digesting the details, but for those interested there is more information here:

      http://www.sia.go.jp/seido/kyotei/

      Here is a list of countries that Japan has agreements with:
      http://www.sia.go.jp/seido/kyotei/manual/contents-5.html
      (Looks like the US is rather recent: 2005/10/1. I wonder how retroactive the treaty is.)

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