TOKYO (Kyodo) -- Japan's welfare ministry on Tuesday released its long-term projections on the country's public pension system, estimating the payout level for a model household will fall nearly 20 percent in real value after about 30 years, in a standard scenario assuming economic growth and employment.
The National Pension System alone will see a drop of around 30 percent, said the ministry, which compiles the projections at least once every five years, amid concerns growing over the country's rapidly aging population.
It estimates that the pension replacement rate, the ratio of monthly payouts for a model household to the average net income of the current working population, will decline from the current 61.7 percent to 50.8 percent.
The government has said it will keep the rate at 50 percent, indicating the scheme is sustainable as long as Japan sees positive economic growth.
The stability of the current system and possible measures for people with low pension amounts are serious topics for Japan, with the government planning to draft revisions to associated laws within this year.
Concerns about Japan's pension system grew following the release earlier this year of a government panel report that estimated an average retired couple would face a shortfall of 20 million yen under the current scheme if they live to be 95 years old.
To sustain the pension system amid Japan's shrinking working population, the government has introduced a "macroeconomic slide" mechanism, a formula designed to limit pension payment increases to less than the rate of inflation or wage increases.
The adjustments will be made until 2047, when the replacement rate will be fixed at 50.8 percent.
On Tuesday, the Ministry of Health, Labor and Welfare presented six scenarios based on the level of economic growth. In the three optimistic scenarios of high economic growth, a replacement rate in the 50 percent range is guaranteed.
In the other three cases of low economic growth, however, the rate will drop to below 50 percent.
In the third standard scenario assuming a real economic growth rate of 0.4 percent, the ministry estimated the standard starting age for pension benefits to be 65, based on a model household comprising a couple earning an average single income and contributing to a corporate employees' pension system for 40 years.
Monthly pension benefits sit at 220,000 yen ($2,000) for the year through next March, a replacement rate of 61.7 percent of the average net income of the current working population.
Although payouts will increase to 240,000 yen in fiscal 2047, the net income of future working generations will also rise, resulting in a lowered replacement rate of 50.8 percent.
In a scenario where economic growth is zero to 0.2 percent, mechanical adjustments will cause the replacement rate to hover around 45 percent until fiscal balance can be achieved.
If economic growth falls to minus 0.5 percent, reserve funds in the pension system will dry up by fiscal 2052, causing the replacement rate to plummet to below 40 percent.