Ahead of the ``fiscal review'' that shows the outlook for future benefit levels of public pensions, which will be held for the first time in five years, a full-scale discussion has begun at a council of the Ministry of Health, Labor and Welfare. A number of committee members requested that the government provide an estimate of what would happen if system reforms were made to prevent a decline in benefit levels, such as extending the payment period for national pension insurance premiums.
The ``Financial Verification'', which checks the financial status of public pensions and shows the outlook for benefit levels for about 100 years, will be conducted for the first time in five years, and the results are expected to be announced around summer.
In this, in addition to the outlook if the current system continues, it will also present an "option estimate" if the system is revised, and at a subcommittee of the Ministry of Health, Labor and Welfare's council held on the 31st, We discussed what kind of "option calculation" we should do.
In order to prevent the decline in benefit levels, the committee members proposed a revision that would extend the payment period for national pension insurance premiums by five years to 45 years until the age of 65, and an estimate of what would happen if the requirements for joining the Employees' Pension Plan were further relaxed. There were a number of opinions that it should be shown.
In addition, by increasing contributions from the relatively financially stable employees' pension to the basic pension finance, we will shorten the period of the "macroeconomic slide" that keeps the growth rate of pension amounts lower than the rate of increase in prices and wages. Opinions were also expressed asking for trial calculations regarding the proposal.
The Ministry of Health, Labor and Welfare plans to begin full-scale discussions on system reform based on the results of financial verification, including ``option calculations''.
Providing a forecast of benefit levels for about 100 years from now
The ``financial review'' of public pensions, which is conducted once every five years, sets out multiple patterns of future population and economic trends, and then provides an outlook for benefit levels for approximately 100 years.
Specifically, we looked at how much the Model Pension payment amount for a household consisting of a husband who had worked at an average wage for 40 years and enrolled in the Employees' Pension and a full-time housewife compared to the average take-home income of the working generation. It is to be expressed as an ``income replacement rate,'' which is a percentage.
The previous fiscal review in 2019 showed that even in cases where employment of women and the elderly and economic growth proceed smoothly, the income replacement rate is expected to continue declining until the mid-2040s, dropping to around 51%.
The decline in the income replacement rate is due to the implementation of a ``macroeconomic slide'' that keeps the growth rate of pension payments lower than the rate of increase in prices and wages as the working generation declines, and economic growth must proceed smoothly. If so, there is a risk that the government will fall short of the 50% promised by law.
The current fiscal review will reflect the latest population estimates, and the challenge will be whether system reforms based on the results can create a path to curbing the decline in benefit levels.
Considering system revisions such as participation requirements and payment period
In the fiscal review, we will consider what kind of system reforms will be necessary in the future, and we will also show you the benefit level if the system is actually revised as an ``option estimate.''
[Expansion of the application of the Employees' Pension]
First of all, the requirements for joining the Employees' Pension will be relaxed.
In the previous system revision, the requirements for company size were relaxed, and from October this year, people working part-time at companies with 51 or more employees will also be able to enroll, but requirements such as working hours will be relaxed. A plan is envisaged.
[Enhancing the basic pension]
In addition, it is expected that a trial calculation will be made assuming two system reforms in order to enhance the basic pension.
One is to extend the payment period for National Pension insurance premiums by five years from now, making it 45 years until the age of 65, similar to the Employees' Pension.
Your insurance premium burden will increase, but your future pension amount will also increase.
The other proposal is to increase contributions from the Employees' Pension Fund to the basic pension finances and shorten the period during which basic pension benefits are suppressed through ``macroeconomic slide''.
Pensions are expected to increase for most people, with the exception of some high-income recipients.
According to calculations made after the previous fiscal review, if these two system reforms were implemented, the benefit suppression period would be shortened by 13 years, and the income replacement rate for the model pension and basic pension after the period ended would be 10% each. Improved by more than a point.
However, it is expected that approximately 3 trillion yen per year will be required as an additional national financial burden by the mid-2040s, and securing financial resources will be an issue.
The results of the fiscal review, including option calculations, are expected to be presented around summer this year, and based on the results, the government will begin full-scale discussions on system reform.