Kokumin Nenkin vs Kosei Nenkin
Japanese pension system consists of, mainly, the two categories: (1) Kokumin Nenkin (National Pension), whose contribution amount is a constant no matter how much to get incomes, and (2) Kosei Nenkin (Employees’ Pension Insurance), whose contribution amount increases according to incomes contributors earn(*).
(*)There is another category in Japanese pension system called “Kyosai Kumiai”, mutual aids for public servants and school teachers. But its system is basically common with Kosei Nenkin, so we don’t refer to it in this article.
(1) All adult Japanese residents have a responsibility to join Kokumin Nenkin. They need to pay its contribution except for Housewives (husbands) with no to little income, students, and low-earners. The amount of contribution is a constant no matter how much they earn, and it is relatively small compared with Kosei Nenkin.
(2) On the other hand Kosei Nenkin is the additional pension system only for employees in private companies. The amount of contribution increases in proportion with employee’s salary(*). The contributions of Kosei Nenkin are withheld by employers before they hand salaries to their employees, and employers collect and pay their employees’ contributions to Japanese government as a whole (that is called “Gensen Choshu”).
(*)There is the maximum amount of contribution.
Contribution of Kosei Nenkin by employers
The story of Kosei Nenkin does not end here. Employers on their own also pay the same amount of Kosei Nenkin’s contributions for their employees. So every employee in reality pays Kosei Nenkin twice a contribution withheld from their salary. Through this system, employers pay a pretty large amount of pension contributions originally allocated for employees. So in a normal case the expected amount of Kosei Nenkin’s old age pension payment is relatively bigger than Kokumin Nenkin’s payment.
Concern of future shortage for pension’s resources
Now there is a concern of future shortage for Japanese pensions’ resources. Japanese pensions’ resources consist of 3 categories: (1) pension contributions paid by workers and companies year by year, (2) reserve fund of past contributions and its investment profit, and (3) payment from national budget. National budget has paid much amount for old age pension payments every year, because the amount of contributions and reserve fund only is short of payments for the retired. This shortage is expected to get more serious because Japanese society is getting older with less younger age. There can be a solution to allocate more national budget to pension payments (including more taxation), but its excessive realization will be difficult. So the government has proceeded a discussion of future pension system’s reform.
The points of pension system’s reform are (1) increase of contribution amount, (2) enlargement of pension contributors to short-time employees (under the present system they are in Kokumin Nenkin, that is planned to pay Kosei Nenkin with more contributions), (3) extension of the period to pay contribution (now by age 60 for Kokumin Nenkin), and (4) procrastination to start old age pension (now from age 65). Ministry of Health, Labor and Welfare, the government office in charge of pension systems, has already proposed part of them to Japanese government as a future reform plan.
But this reform is expected not to be an easy process because Japanese people will inevitably raise an objection against more burdens with less benefits. Recently a candidate of the chairperson of leading Liberal Democratic Party was reported to have a plan to procrastinate old age pension to age 80, and Japanese public cast a big booing to the candidate.
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