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Editorial: Generational trust needed to sustain pension system

The House of Representatives has passed a bill to reform the public pension system, which would reduce public pension benefits in proportion to a decline in wages, and sent it to the House of Councillors.

    The government has decided to extend the current extraordinary Diet session by two weeks until Dec. 14 to make sure that the bill will be passed into law by that time, while opposition parties including the Democratic Party (DP) stand fiercely against the move.

    To sustain the pension system, it is essential to deal with growing problems with impoverished elderly people, maintain the population size by slowing down the declining birthrate and aging society, and stabilize employment. The executive and legislative branches of the government should hold constructive debate on the issue.

    Under the pension reform bill, a system to adjust the amount of pension benefits in proportion to the level of advancement of the birthrate decline and the aging of the population would be implemented even if deflation worsens. This system is called a "macroeconomic slide mechanism."

    Moreover, a decline in wages would be reflected in pension benefits even if the decline is larger than a fall in consumer prices. The DP and other opposition parties are criticizing the legislation as a "pension-cutting bill" because it would reform the pension system to restrain the amount of pension payments.

    To discuss the pension system reform, it is necessary to consider the function and structure of the system.

    Nobody knows how long they will live. Even if one is to work until the age of 65 and save enough money to live until reaching the average lifespan, the person could live to be over 100. Most people would not feel secure no matter how much they save up.

    Under the Japanese public pension system, premiums paid by working generations are used to pay benefits to retirees. Pensioners can continue to receive benefits for their entire lives.

    However, the amount of premiums workers are required to pay is in proportion to their salaries. Therefore, the current pension system is unsustainable unless working generations are paid enough to contribute.

    It is true that the bill could lead to a decrease in pension payments. At the same time, financial resources for pensions that workers will receive in the future would be cut if the amounts of benefits that current pensioners receive remain at high while wages and consumer prices declined. In addition, the longer those who already receive pensions live, the smaller the resources will become for these people.

    Considering these matters, shifting the levels of pension benefits in proportion to the wage levels is necessary to sustain the pension system in the long term.

    Nevertheless, many people are worried about the sustainability of the Japanese pension system, largely because there are a growing number of impoverished seniors who receive small pension payments or none at all. The number of elderly people living alone has also been increasing. And it is a pressing task to consider how to support these seniors who cannot expect financial support from their families.

    It is unreasonable to expect all these problems to be solved through the current pension system. Under the scheme, those who have paid premiums for at least 25 years are eligible for benefits (this period will be shortened to 10 years starting from September 2017). If the government were to try to extend relief to those eligible only for low or zero benefits solely with the public pension system because they failed to pay premiums while they were working or didn't pay them long enough, it would exhaust the resources for the pension system.

    While it is necessary to expand the scope of relief measures by making part-timers and other non-regular workers eligible for the employee pension program, it will be difficult to solve all problems involving impoverished people solely under the current pension and public welfare programs. Attempts to do so would undermine the public's sense of fairness and hurt the people's confidence in these systems. It is essential to swiftly draw out plans on how to extend relief to seniors in need.

    The DP has criticized the reform bill, insisting that the public pension system should be fundamentally overhauled. However, the system is being threatened mainly by an imbalance in the age composition of Japan's population, in which the number of workers has been declining while that of pensioners has been growing.

    What is needed in the long run is to tackle the birthrate decline to put the brakes on the shrinking population of workers. If the economy were to be propped up and declines in consumer prices and wages prevented, the levels of pension benefits would not have to be reduced even under the bill. The rate of yields on some 130 trillion yen of pension funds would also improve, leading to stability in the public pension resources.

    If the number of people aged 65 and older, who remain healthy and continue to work without receiving pension benefits, increases, the population of premium payers will also rise. Full-time housewives are eligible for pension benefits even without paying premiums, but if the female workforce grows, the number of those who contribute to the pension program will further increase.

    The government should present a thorough outline of the future pension system to the public while taking these factors into consideration.

    However, Prime Minister Shinzo Abe, when talking about the pension system reform, told the Diet, "If you don't understand what I'm saying, there's no point of holding discussions like this for hours." It was an insincere attitude that disregards the public's concerns about the pension system.

    It is understandable that elderly people are worried about the latest pension system reform bill. However, younger generations have a sense of unfairness and distrust about the system as their pension payments will be lower than those receiving benefits now.

    Solidifying the basis for young people's livelihoods will help stabilize the financial resources for the pension system and allow their parents and those in the same generation to feel secure about their post-retirement lives. In-depth debate should be held on the pension program to allow the public to feel confident about the system and that it can be sustained if mutual assistance between generations based on their shared sense of trust is ensured.

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