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Gov't mulls abolishing pension reductions for some elderly workers

The Central Government Building No. 5 that houses the Health, Labor and Welfare Ministry is seen in this file photo taken in the Kasumigaseki district of Tokyo. (Mainichi/Kimi Takeuchi)

TOKYO -- The government and ruling coalition are considering abolishing the system where the payments of employees' pensions are reduced for elderly workers with incomes above certain levels, it has been learned.

The move comes as the government has mapped out a policy to revise systems to pave the way for elderly people who are willing to continue working to do so. The current old-age pension system for active employees has been criticized for discouraging seniors from staying in the workforce due to reduced pension benefits.

The government has judged that it is necessary to abolish the system to encourage the elderly to remain active workers. To this effect, the government is seeking to submit a bill to revise the Employees' Pension Insurance Act and other laws to the regular session of the Diet next year.

The current old-age pension system for active workers targets recipients of employees' pensions with labor incomes above a certain level who are aged 60 or older. Pension payments begin to be reduced for recipients aged between 60 and 64 with monthly incomes of more than 280,000 yen in wages including bonuses and pensions, and for those aged 65 or above with more than 470,000 yen in monthly income. The more income pensioners receive, the greater the amount the reduction becomes.

According to the Ministry of Health, Labor and Welfare, as of the end of fiscal 2016 there were some 880,000 people aged between 60 and 64 and roughly 360,000 people aged 65 or above who were eligible for the old-age pension for active employees. Because of the system, some 1.1 trillion yen in pension payments has been saved every year.

Japan's pensionable age will reach 65 for men in fiscal 2025 and for women in fiscal 2030. Accordingly, the old-age pension for active employees aged in their early 60s will become virtually ineffective, though the system for that age bracket has contributed to curbing some 700 billion yen in yearly pension payments.

Meanwhile, if the current reduction system for workers aged 65 or above is abolished, the government will need to secure additional financial resources to cover approximately 400 billion yen in shortfalls. As the change to the system significantly affects pension financing, the government and ruling camp are considering increasing the pension benefits in stages before recipients can receive the full amounts.

The present reduction system for employees aged 65 or older is also aimed at alleviating burdens on the younger workforce. If the system is terminated and those aged 65 or above are to receive full amounts, criticism would arise that the government is giving preferential treatment to high-income earners. Some in the ruling Liberal Democratic Party are therefore calling for a review to the taxation system, including requiring such elderly high-income earners to pay higher income tax.

According to an analysis released by the Cabinet Office in August 2018, there would be around 140,000 more men in their 60s still working full-time had there not been for the pension reduction system.

However, some observers point out that the abolishment of the system would be more effective for those in their early 60s in encouraging employment, as the level of income above which recipients are entitled to reduced pension benefits is set higher for those aged 65 or above. The government and ruling bloc will take these factors into account in discussing the abolition of the ongoing system.

(Japanese original by Ai Yokota, Lifestyle and Medical News Department)

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