JAPAN: Japan's pension system is complex

. TOKYO, Japan / The Japan Times / Opinion / October 5, 2009 EDITORIAL Comprehensive pension reform Japan's pension system has many problems. It is complex. The Kokumin Nenkin pension system is for self-employed people, pensioners and jobless people. The Kosei Nenkin system is for workers at larger companies, and the Kyosai Nenkin system is for public servants and teachers. There is another system for workers at small companies. Premiums and benefits differ from system to system. Less than 50 percent of Kokumin Nenkin participants are actually paying their premiums. If this rate of delinquency keeps up, it is feared that many people will have to live on small pensions, if any, thereby creating a serious social problem. The ruling Democratic Party of Japan proposes creating a unified system covering everybody under the principle that people with the same incomes should pay the same premiums. The proposed system would consist of the minimum, guaranteed monthly benefit of ¥70,000 plus the benefit linked to the amount of premiums individuals have paid. The guaranteed portion would be fully funded by consumption tax revenue. When the premium-linked benefit increased beyond a certain level, the guaranteed benefit would be reduced accordingly. Employees would pay 7.5 percent of their income as premiums with employers paying an equivalent of 7.5 percent of the employees' income. But it is unclear whether self-employed people should pay the full premium amount — that is, 15 percent of their income. The DPJ has not made clear when and by how much it will raise the consumption tax to pay for the guaranteed benefit. People may oppose the proposed introduction of the social security number system as a violation of privacy. Transition to the new system would start in fiscal 2014; until then, the government would concentrate on resolving the current pension records fiasco. The DPJ needs to answer many questions about its reform proposal. For the time being, it should do what it can to include irregular workers in the Kosei Nenkin system and to integrate the Kosei and Kyosai Nenkin systems. It should build consensus on pension reform by holding talks with the opposition parties. [rc] (C) The Japan Times Ltd Seniors World Chronicle adds Click here for more about Japan's National Pension Insurance