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© (c) Copyright Thomson Reuters 2019.Estimates cast doubt over Japan's public pension sustainability
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C Jon
The Japanese government could improve its pension system by encouraging higher levels of household savings and continuing to increase the level of state pension coverage, since 49 percent of the working age population is not covered by private pension plans. Introducing a requirement that part of the retirement benefit must be taken as an income stream and not a lump sum will improve the overall sustainability of the social security system — as would reducing government debt as a percentage of gross domestic product, as this improves the likelihood that the current level of pension payments can be maintained (source: https://voice-on-growth.mercer.com/en/articles/retire/asia-must-navigate-pensions-crunch.html)
Bugle Boy of Company B
Yeah, I know. But you just told me that I was, so I stopped arguing with you. And now you change your stance! lolz
Okay.
I will admit that the numbers aren’t exact. I don’t keep my health insurance bills handy at all times. But the numbers should be fairly accurate. Anyway, I don’t need to speak with a financial advisor. I haven’t got many finances to receive guidance on anyway.
cleo
You cannot benefit from the programme without putting in; when you go to the dentist's, you show your Health Insurance card, yes? If you don't, you pay full price. If you have the card, it's proof that you've 'put in'.
I understand the health insurance varies depending on your location, but even so ¥2500/month seems extremely low to me.
Where I live, the premiums for a person under the age of 40 in a single household with a taxable income the previous year of under ¥840,000 come to ¥75,990, or ¥6,333/month, and I don't think I live in a particularly expensive local authority.
Either you're pulling numbers out of thin air, or you need to sit down and have a good talk with your financial advisor.
Invalid CSRF
Bugle Boy of Company B
Okay, fine. I'm benefiting from the program without putting in. You got me. I'll also watch NHK without paying for it.
cleo
Sigh.
If you use your Kokumin Kenko Hoken when you go to the dentist (or any other medical facility) you are benefitting from 社会保険.
Flute
You are missing the big picture. You are already benefiting from the pension (shakai hoken, kokumin nenkin, ...). The pension system is part of the economy. You are not a survivalist living in the wild unlinked to anyone. You are making money on stock which is partly linked to pension, you use community facilities partly founded by pension, ...
Bugle Boy of Company B
Cleo, i’m going by what the tax office agents told me, so I don’t see the problem here.
My income outside of Stocks is around 1 million, and other taxes, as well as health insurance are based on that amount
Flute, i’m sure you aren’t referring to ME! I don’t intend to benefit from 社会保険 at all.
cleo
If you make money on stocks and shares, the govmint takes out 20.315% as tax; 15.315% as income tax, 5% as resident tax. You can either declare the amount yourself in your annual tax returns, or use a 特定口座 where the tax is taken out before you get your money. The tax office workers probably advised you to use this kind of account? If they were telling you that you don't need to pay resident tax, they were telling you wrong.
https://minkabu.jp/beginner/lesson/28.html
Something doesn't compute there. Is your income low, or are you making enough from stocks to pay 'plenty of taxes'?
Invalid CSRF
Flute
Creepy to read someone boasting about taking benefit of the system but refusing to give her.is share. It is, I guess, the same mindset for company which find every loophole possible to avoid paying shakai hoken but find perfectly normal to get profit and benefice out of it.
Pension system is a mutualized one. That is not Ponzi scheme. If you consider it as a Ponzi scheme, you should think the same of health insurance, taxe, insurance, ... and take the same stance : not paying. Bit harder as you will have to pay the full bill for health issue (What about brushing you tooth ? It works well against cavities. ), damages, be kicked out of the country, ... In the other hand for pension, you can still expect to get some kind of guaranteed minimum income or aim at free meal and roof in some prison.
Bugle Boy of Company B
Me too. So I pay for the services I use. I won’t receive any pension so it shouldn’t concern you. And money from the pension program isn’t used for health coverage. So no problem.
I pay plenty of taxes because I make money with stocks. But this income does not affect how much you pay in health insurance premiums or resident taxes. That’s the law. I did not make it up. The tax office workers told me this. So does this make me a bad guy?
Eppee
What low ethics and morality ...
You've chosen Japan to live and setup your business you have to abide by the Japanese law.
Yubaru
So you openly admit that you use the system here for your own benefit, but you do not pay into the pension scheme as required by law. You are admittedly breaking the law regarding the requirement to pay, but you want to use the health insurance for your own benefit.
I wonder what kind of business you are running when you are morally and ethically flaunting the rules
Yubaru
Payments which are based upon your previous year's income, and seeing as how it is as low as it is, we who are doing our part, are paying for people like you who want to abuse the system.
I truly dislike the idea of having to pay for someone else who is scamming the system!
Particularly people who refuse to pay into the system as they are required to by law, and then will collect welfare off of our tax money when they retire because they didnt pay like they were required.
Omachi
Actually, I think that Japan’s pension system is rather good – having room for improvements of course, but in meeting a societal need, mostly spot on. It keeps alive the elderly, and those with disabilities who have insufficient funds to live on for whatever reason, and forces them to contribute during their income producing years.
shashank
One of the reasons why people should not immigrate to japan.
JeffLee
No they aren't. Because governments like Japan's are able to create and issue the money that funds the scheme.
mmwkdw
Yes, Government run Pension schemes are akin to Ponzi schemes. Perhaps we should be sueing Governments and putting them in jail alongside the likes of Madoff.
Alternatively... we should be ensuring that these Schemes are run aggressively with Fund Managers paid upon realized return rates (not Mark to Market), and with sound oversight and Risk Management in place monitoring the viability of their existence - just as is the case in the Private Sector . Income stream shortfalls vs good investment strategies should be balance out, and Government Policies to address the income stream deficiencies should be sensible long term action plans.
The current one of bringing in overseas employees begs the question - what happens to their Pension contributions for the period of time that they're here - unless an agreement has been setup between Japan and their home Country, they themselves will have a gap in their own contribution history and be penalized as such.
Bugle Boy of Company B
I've had plenty. And I use my Kokumin Kenko Hoken insurance when I go to the dentist.
The bills indicate - and I have confirmed this - that they can only force payment for the last 2 years. Payment demands older than 24 months are gone, never to return. On the "down" side, if one were forced into making payments, they would only be eligible for pension payments based on the time they were in the system.
So if I got forced in to the system 15 years later when I was close to retirement, I'd get almost nothing. Whereas if I applied for an exemption and spent the next 15 years at the same income rate, I'd get a lot more. Except I don't plan on having a low income for much longer - and, more importantly, the Ponzi scheme, sorry, the pension program is going to fail before I am old enough to receive anything.
talaraedokko
But changing the constitution and fighting for pieces of rock in the middle of nowhere is high priority. Who cares about the citizenry? Once retired they’re a liability, not an asset. So, who will pay for the shinkansen, the tolls, taxes, etc. ? How about the minimum waged incoming foreigners? Milk them next. Sponsor a few more Olympic sized events, and whatever more we can think. Foreigners..a deep love-hate relationship. I remember just a few years ago there was no good word for them until it proved our Dear Leader’s unspoken 4th Arrow was the winning arrow. God help us all.
Norman Goodman
Ponzi schemes are illegal if we do it. Legal if the government does it.
dougthehead13
There will be no solution to this problem. With an inverted population pyramid. Where the birth rate does not increase. The only solution is for pensions to be paid via general state budgets. Through the collection of taxes.
What should be done is to reduce the weight of the state by reducing public employment to the minimum necessary. In order to have the maximum money raised available for use in pensions. But only people with few resources and who have not been able to contribute to social security in their personal lives. I am talking about reasons of illness, incapacity or social exclusion.
People who are wealthy or in stable employment. They will have to pay a private pension fund as long as the state does not deduct from their payroll. The attributions and rates of social security. This group of people should be exempt from paying such fees. In exchange for not benefiting from them.
thepersoniamnow
Bugleboy
Don't be surprised if you get a collective bill in the millions of yen.
And it’s not a scam, it’s the national health system. A very good system and as a resident of Japan you should be participating, but you seem quite proud of your style....ok.....
may you never have a cavity
Bugle Boy of Company B
Oooh! He's using BOLD letters!
You expect me to remember the exact number of something I don't intend to pay? That's more than a little odd.
I realize I can go to the city office and apply to have my pension payments exempted because my income is low. But I don't expect to have a low income forever and I don't want to start a history of paying something (even though it would be exempted) and then try to back out later once my income rises.
I pay my health insurance. It's like 2500 yen / mo. If pension were taxes, then they'd be done through the tax office. NEXT!
Yubaru
100,000 plus to someone only making 1 million yen a year, and you want to say its purely a mistake? Yeah right.
And yes it is most definitely missed payments as you are in effect refusing to pay what you are BY LAW expected to submit through taxes, as the pension and health insurance are both taxes, kokumin kenko hoken ZEI and kokumin nenkin hoken ZEI.
You legally are required, if you live here, to pay into both, and if you have a business here you would know that intimately as well. So either what you are writing is bs or you have no idea what you are talking about, or perhaps both!
If what you are saying is in fact so then you are in effect, and by your own admission breaking the law here.
JeffLee
@wolfpack
Sure, feel free to hand over your life savings to the likes of Bernie Madoff, Jeffery Epstein, Lehman Brothers and other private-sector idiots instead, and then watch what happens. Tick, tick, tick....boom!
Bugle Boy of Company B
MISSED payments!? I never gave them a cent! Neither did I sign up for the scam. You're going to hold on to the mistake of 300K vs 200K? It's hardly the point here. I know what they are asking for. I have the slips in my office filing cabinet. I don't pay for things I didn't order or ask for.
Not asking you to. I'm using legal tax loopholes to reduce my taxable income while building long term investments. Problem?
Yubaru
You are in business in Japan, get bills from the pension service for missed payments, dont know how much you are supposed to be paying, assuming it's one thing and then accepting that you dont know what you are talking about in the first place.
Right....you really do need to get into a different line of work! I dont want to be paying for YOUR inability to run a successful business!
Hervé L'Eisa
Lo, and behold ; the socialist ponzi scheme known as National Pension is likely to collapse under its own weight. It is inevitable.
Bugle Boy of Company B
I suppose if the government prints more money, sure. You'll get your pension and it will be worth peanuts.
Black Sabbath
It's sustainable. And all prattle to the contrary is mendacious concern trolling.
Toasted Heretic
Non sequiturs - a different kettle of fish.
Give people their dues, older people are maligned enough.
Vince Black
Get arrested and put in jailfor not paying pension? What planet are you on? Prisons in Japan would be overflowing if that were the case. Wake up
Drako
I am not Japanese, not a Japanese Citizen, but I live in Japan. I work one day a week (I am a disabled Veteran) and I am expected to pay into a system I will never get money from. I will have to depend on my VA Disability, and my Social Security from America (if that is even around in 20 years).
Ah_so
I think that I first read an article on Japan’s ticking demographic time bomb and its pension woes in 1992 or 1993. There has been plenty of warning.
The politicians are most to blame for their refusal to acknowledge that they are the drivers of a train hurtling towards the buffers because they don’t want to alarm the passengers.
Bugle Boy of Company B
I checked. You’re right, Subaru. It’s not just under 300,000. It’s just under 200,000. But my question is still valid. How can I be expected to pay that on such a low profit ?
Maybe I know how to manage my expenses better than others? You can claim just about anything as legitimate business expenses these days!
...Invalid CSK something or other
wanderlust
More than 25 years ago, people were saying that anyone under the age of 45 would not receive a pension when they retired, as the system was broken.
Now it looks as if no-one under the age of 25 will recieve anything when they retire.
Yubaru
You are not required to pay 300,000 into the pension scheme per year, as you stated earlier. The most would be just under 200,000.
Which has nothing to do with your "profit margin" Maybe you are in the wrong business if you cant keep up with your bills!
Invalid CSRF...
Tom
Nigel and Yubaru got it right. I am doing the nenkin game now. By the way, the dependent spouse has to start paying into the system, the minimum per month, slightly over ¥16,000 after the spouse that is supporting her reaches 65. The bill comes six months later is is rather painful to lay it all out in one shot.
This also kakyunenkin.
fxgai
Amusing to read criticisms of the pension fund being somewhat invested in international stock markets.
On the contrary, that's one of the few things that the pension fund can be said to get right! If anything I think the fund should reduce its allocation to Japanese stocks and boost its allocation to foreign stocks. This money is long-term pension money, not short-term speculative funds. Temporary stock market dips and plunges are blips in the bigger scheme of things (except perhaps in the case of Japanese stocks, given that the local market is still only around half its historical peak).
cleo
You mean someone who scrimps and saves to pay a mortgage should have to sell their house and live on the proceeds until their assets have dwindled before they qualify for a pension, while someone earning the exact same income who spends it all on havin' a good time (sake, geisha, enka and expensive ryokan) and slides into retirement stoney broke should be given a full pension from Day 1?
If you've paid into the pension scheme, you should be entitled to a proper pension. If you haven't paid, no pension. Full-time housewives should have their pension premiums paid by their husbands, ie the husband should pay double.
Invalid CSRF
nigelboy
Statistically, that’s what’s been happening. What the older generations paid in is far less than what is paid out to them hence the deficiencies. Compounded by extended life expectancy, deflation, and population decrease (decreasing working population contributing the premiums )
Better design, as you put it, is simply levying more taxes.
Laguna
I pay into the health system here; it's expensive but pretty much required. But I've always begged off on the pension system - I tell my Japanese accountants I'm enrolled in America's SS and the reverse to my American accountants, and they have no way to confirm.
But be careful:once you've enrolled, it's impossible to get out.
Omachi
I'd prefer that death taxes take a much bigger bite for the truly wealthy and this additional taxation be used to support the system. It is harder to hide wealth once you have died.
Eppee
I think it's all because of the misunderstanding of the Japanese pension system. Unlike most of the US (maybe Australia also ?) systems which are based on capitalization, in the Japanese pension system the working population pays directly for the retired population. You don't capitalize for yourself, you pay for your parents.
Omachi
I paid in to Kokumin and Kosei Ninkin for years and now receive - but under no realistic longevity scenario will I recoup even half of what I (and my employers) paid in – not counting interest or investment profits. The system pays the salaries of the admin workers who are numerous, and as with any government program are not particularly efficient IMO. But it is a system that most elderly rely upon, and no doubt will for generations to come, so needs to be supported.
fxgai
Only because the system design is unsuited to such a population.
The government is fidgeting with the system, rather than reforming it to one of fundamentally better design. Yes because it is scared of the wrath of the people, but who said governments wouldn't have to make hard, tough, but necessary decisions ever?
Hey, it absolutely is unsustainable, there is no doubt about this, so forget worrying about it, and take measures.
This much is exactly right. Some people seem to be deluded into thinking that what they pay in, they get back out later. But no, that's not how a pay-as-you-go scheme works (and obvious when one considers one may die before receiving it all back, or living for a really long time). The answer is not to deny or complain about it this reality, the answer is to abolish the pay-as-you-go scheme and introduce one of better design that ensures all elderly are provided for adequately.
Bugle Boy of Company B
Yubaru, I have a business with a low profit margin. Is that a crime?
Hello Kitty 321
Why should people get a percentage of their pre-retirement income? Everybody should get the same and it should be enough live on, not 79,000 yen per month as it is now.
nigelboy
JeffLee.
I’m afraid you lost them. Doesn’t matter that Kyle Bass was proven wrong again and again.
bobfor2
its very clear, we all need to save for our retirement, those that don't do so are foolish
Wolfpack
Socialism - a ticking time bomb.
daito_hak
This is not true at all. The pension system in Japan has been known during the last 20 years to be in a trajectory for a severe collapse given the debt of the country and the rapidly shrinking working population required to support the pension system. Yet no decision and action have ever been taken to help the future generations to cope with that gigantic issue. Instead, the LDP has continued wasting an outrageous amount of tax payer money to help Japan Inc. instead of implementing a radical change on how the country operates and how it can mitigate the shrinking working force. I have been living here long enough to witness this.
The best they could come up with is to try to gradually introduce the idea that people will have to work way longer that they do now in order to get a full pension. Basically they do what the Japanese leaders have always done to their population. Consider it as second-class people.
Scrote
The graphs in the paper this morning all showed average incomes rising in the future, whereas the reality in recent years is they have been stagnant or falling. Even if the pension payout remains at 60% of average income, if those incomes continue to fall so will pensions.
I thought the consumption tax increase was supposed to help make pensions sustainable, but the government has decided to fritter it away on other things instead. I suppose it gives them the opportunity to use the same argument when they raise the consumption tax to 15%.
nigelboy
Actually, the whole pension system is like that. Premiums paid by the working population goes to pay the retirees.
In the case of kousei nenkin, the basic scenario is that the premium amount you paid through your working days (let’s say 40 years between 25-65) versus the distribution days (let’s say 20 years between 65 to 85) is half. If you live beyond that, you would have received more than the double you contributed and counting.
In your case, you got the refunded premiums at discounted sum( MHLW thanks you )to only be invested in an annuity which is solely depended on the net principal you put in.
Henny Penny
True, but this is a general pattern. I have pension income from the UK, the US, the state of California, and Japan. As a consequence, news articles about pensions anywhere catch my eye. Japan is far from being a basket case although it certainly does have problems. Some US states are already where Japan is projected to be decades in the future.
At least in Japan, the issue is getting top level government attention rather than being glossed over as has been done in some US states and some European countries.
They are everywhere. This is about as profound as saying water in Japan is wet.
Yubaru
No this is about HERE the Japanese system. Its not an opinion, it's a fact, regarding the payment requirements. And if he is truly in arrears and only has a set income, he should be getting an exemption here.
A few things dont add up, from experience here, with what was written, particularly the part of being required to pay 300,000 per year, as the pension payments are no where near that amount for someone with that level of income Not to mention that even the TOP end of payments for those who are self employed 16,800 a month and that only happens after paying in for at least 8 years.
https://blog.gaijinpot.com/guide-pensions-foreign-residents-japan/
The information given in the post does not add up!
drlucifer
60 grand should be six million yen.
drlucifer
I suspect the figures quoted in the article refer to the kosei nenkin rather than the kokumin nenkin.
Those on kokumin nenkin receive far lower if I am not mistaken not more than 79,000yen per month.
Disillusioned
@Yubaru - So, you are basing your opinions on the US system and complaining about US taxes subsidising retirees? Is the US system like Japan's scam? I think not! I too keep my taxable income low to avoid this scam. I go to the pension office and very easily gain an exemption. I have a private superannuation fund I have been paying into for over 30 years which will pay me a handsome dividend in a few years when I retire. This is why I have been fighting so hard not to pay my retirement funds into this scam that I only receive 20% of my funds back. My super fund will pay me +20% of my investment, not minus 80%.
Yubaru
It is a "tax" and tax payments take precedent over any other bills or payments you may have, If you are in arrears and they choose to get nasty about it, they can garnish any income you have, and or, take away any property of equal value to pay it off.
This makes zero sense, as this amount puts you well under the poverty line and you can the rest of US cover your payments though OUR taxes! People who do not make enough money to pay into the pension or health insurance can get subsidized assistance through the government.
So either you are leeching off of someone else to live here, or what you are saying is a fantasy?
JeffLee
No real problem. Fiat currency, low inflation, no debt obligations to foreigners. Under those conditions, Japan's pension system IS sustainable.
Bugle Boy of Company B
Well, I only make about 1 million yen taxable income a year and they expect me to pay 300,000 a year in payments? It's not going to happen.
Disillusioned
From what I see, nobody 'enjoys' their retirement in Japan.
kurisupisu
Having been in Japan for 28 years, having enjoyed the opportunities at the end of the inflated economy, I was mostly satisfied.
However, 18 years ago I decided that the economic malaise was going to be a larger and larger problem so, I took a large sum of money and invested in overseas property which has doubled in value.
Suffice to say, I won’t be enjoying my retirement in Japan....
GyGene
Boys, we’ve made it this far, we shall make it from here.
Disillusioned
I have nothing buy contempt for the Japanese pension scam. The J-Gov has been scamming people for this rip-off since its inception shortly after WW2. I've fought hand over fist not to be made to pay this scam although, I have still been bled for 8 grand in a few years I was at a Japanese company. I made enquiries about getting the money back and I am entitled to a 10% rebate after I have lived outside Japan for one year. However, the application must be made in Japan, which makes it more expensive than the actual rebate. I'm quite sure it was set up this way on purpose so all the foreigners who are made to pay it will not bother to apply for their rebate. I contacted the minister directly in an attempt to gain exemption form this scam. The only reply I got from him stated that Japan has an agreement with Australian pension, which is absolute malarkey! They 'may' very well have some kind of agreement but, only 10% of the money will be forwarded outside Japan. 90% will stay in this pyramid scam!
However, it's not just foreigners getting scammed. My Mrs has been paying into this 'slush fund' for many years. She received a statement from them the other day. She has paid a little over 60 grand (¥60 million) into this scam. However, her actual entitlement is a little over 13 grand (¥1.3 million). That is less then 20% of the money she has "uhum" invested. More than 80% of her retirement fund has disappeared into the pension coffer!
A pension fund 'should' be a mutual fund invested that pays dividends. It should not be a sham that uses your retirement investment to pay for a the failings of a poorly structured and poorly managed slush fund. The J-Gov has even become so desperate they have invested this fund into the international stock market in an attempt to gamble for a dividend. If the international stock market crashes, like it has in the past, this slush find will disappear and nobody will have a pension at all. It's just another 'money for nothing' scam in Japan.
daito_hak
If you think about it, that's already actually quite low given the average salary, in Tokyo in 2018 a mere 325,000 yen per month, and how ridiculously expensive it is to live in Japan.
kohakuebisu
I wish they would release figures about what % of people are actually covered by their model case. It's someone who's paid into shakai hoken for the full 40 years.
I've got one of the (stupid) morning shows on at the moment and they are talking about it. No mention of dependent spouses paying in nothing so far. They've mentioned part time workers paying in.
ksteer
That's a good way to get arrested and then deported... You do realize you are required by law to join it.
Aly Rustom
Not to mention Abe's foreign aid- much of it given to dispicable people like Aung San Suu Kyi and Rodrigo Duterte.
It doesn't get resolved. That's why the whole problem
Bugle Boy of Company B
I get envelopes every month telling me I am in arrears. I am not joining that money pit scam!
Wallace Fred
Smart inquiring minds wonder. How long will the ldp regime continue to fleece the populace? Seriously how long?
nedotjp
This has been a known at the FSA for decades plus.
This has always been the LDP's M.O. Too little too late in any national governance, aside from Abe's pet project article 9, which panders to the same voter demographic from a right angle
Yubaru
And only said by someone who has no idea why the tax increase is coming and for what purpose the increased funds are going to!
You are assuming it's for debt relief, but that is 100% wrong! The increase is earmarked already to be used for funding social welfare programs for children.
thepersoniamnow
Well the debt is to itself, and money is invented, and medical service is a concept, so yeah I imagine that less will be paid as prices rise.
JJ Jetplane
That is a huge drop from the current rate of roughly 60% of the retirement income. It will drop even further when you count inflation and possible falls in the world economy. As less people pay in and more take out, you will have an unsustainable system.
vanityofvanities
So, there is no reason people to oppose the government raising the consumer tax to 10％. That is still far short to cover the deficit and will go up higher and higher in the future.
nigelboy
And the same report states the “model case couple” on average has 20 million yen in financial savings.
https://www.fsa.go.jp/singi/singi_kinyu/tosin/20190603/01.pdf
pg. 16
The report was intended to encourage population to diversify the retirement portfolio as opposed to simply relying exclusively on pension payments.
Samit Basu
What else is new. Everyone knows Japanese government is going bankrupt. The 250% debt to GDP ratio is simply unsustainable and when the interest rate rises on Japanese government bond, they will rocket and consume all of Japanese government tax revenue, not rise slowly.
If you are expats living in Japan, it is time to look for the best time to return home, you wouldn't want to retire in Japan. As for Japanese nationals, save up and be ready to migrate to Thailand or the Philippines for the retirement.
sakurasuki
Lot of important topics in Japan become sensitive topics, so people just keep avoiding discussion about those topics. So how it being resolved if never being discussed ?
Yubaru
And with added costs, as things are not going to get cheaper, you are putting the elderly further at risk of living in abject poverty!
You've know this was coming for at least a generation, and you allowed major loses to the fund through poor management, and now you expect the people to up and change to something new, just as they are hitting their retirement years?