Structure and History of the Public Pension Schemes

Overview
Structure of the Pension Schemes (as of the end of March, 1998)

Structure of the Public Pension Schemes

The public pension schemes in Japan are composed of the National Pension, Employees' Pension and Mutual Aid Pension schemes. The National Pension provides a basic pension for every Japanese national (age 20 to 59,) and the Employees' Pension and Mutual Aid Pension provide pensions which are supplemental to the National Pension, in proportion to the individual's remuneration. Private-sector salaried workers participates in the Employees' Pension and a civil servant joins a Mutual Aid Association. The National Pension Fund has been established to provide a supplemental pension to the basic pension to the self-employed, and Employees' Pension Funds supplement the Employees' Pension.

At the end of March, 1998, 70.34 million people participated in the National Pension and 38.81 million people in Employees' Pension Schemes. The number of beneficiaries were 18.30 million for the National Pension and 9.92 million for Employees' Pension Schemes.

Detailed Information 1
Flow of Major System Revisions

Detailed Information 2
List of Public Pension Schemes

National Pension Scheme

Employees' Pension Scheme

Detailed Data 1
Annual Changes in the Number of Participants in the Public Pension Schemes (national pension insured persons) (as of the end of FY)

Detailed Data 2
Changes in the Number of Public Pension Beneficiaries
(as of the end of FY)

Detailed Data 3
Changes in Total Pension Amounts for Public Pension Beneficiaries
(as of the end of FY)

Detailed Data 4
Expenses Required for Public Pension Benefits

Pension Amounts

Overview
Pension Amounts

The pension benefit level of the Employees' Pension has been set based on the concept of ensuring a certain percentage (approximately 60%) of the wages of the current working population, and that of the basic pension is based on the concept of paying for the basic portion of expenses in post-retirement life. The 1994 revision improved the pension amounts in accordance with the improved living standards since the previous revision and other factors.

Total Pension Amounts

The total amount of the pension benefits paid was \8,402.8 billion for the National Pension and \16,973.1 billion for the Employees' Pension as of the end of fiscal 1996. The percentage of the total amount of old-age pension benefits has increased in both schemes.

Detailed Data 1
Improvement in the Pension Amounts (monthly amounts)

Corporate Pensions

Overview
Structure of Employees' Pension Funds

The Increasing Role of the Corporate Pension

While the public pension provides a basic pension for people in their old age, the role of the corporate pension is increasing as a means of meeting the various needs of elderly people, and to allow pensioners to enjoy a more affluent life in their later years.

Employees' Pension Funds

Employees' Pension Funds (EPFs) are special judicial persons established with the approval of the Minister for Health and Welfare. EPSs provide a part of the benefits (remuneration-based portion, excluding the part subject to indexation and revaluation) for the Employers' Pension and also provide their own supplemental lifetime benefits.

EPFs' services are financed through the collection of premiums from participants and their employers. The participating employers are exempted from paying the government the premiums applicable to the substitutional portion. Instead, they will pay the EPFs the premiums necessary for the benefits provided by them including the substitutional portion.

The exempt premium rate used to be set at 3.5% across the board. Beginning in April of 1996, individual EPFs are able to set their rates within a pre-defined range (3.2%?3.8%) so that the premium will be sufficient to pay the costs needed for the services substituted by individual EPFs.

Miners' Pension Fund

Miners' Pension Funds are supplemental pensions for coal miners. They provide benefits which are supplemental to the Old-Age Employees' Pension, being completely independent from the Employees' Pension. The participants in these funds number approximately 2,000.

Tax-Qualified Pension Plans

Tax-Qualified Pension Plans are operated by corporations. Preferential tax treatment is given for premiums and reserve funds for corporate pensions approved by the Director General of the National Tax Administration Agency as applicable to certain conditions of the taxation system.

Detailed Data 1
Changes in the Number of Employees' Pension Funds, Participants and Reserves

Detailed Data 2
Annual Changes in Employees' Pension Funds

National Pension Funds

Overview

Objectives

The system of National Pension Funds was established by a revision to the law in 1989 as a system that provides the self-employed with supplemental pension to the Basic Pension so that they can lead more affluent lives in their old age. The system was implemented in April of 1991.

Types of National Pension Funds

There are two types of National Pension Funds: community-type funds (47 funds) and occupation-type funds (25 funds) (the numbers are as of the end of fiscal 1997).

Participants

No. 1 insured persons (self-employed) of the National Pension may opt to participate in one of the funds. However, those who are exempt from paying the premium to the National Pension and participants of the Farmers' Pension Fund cannot participate in these funds.

Preferential Tax Treatment

All the premiums are subject to social insurance contribution deductions. The benefits provided by the funds are subject to deductions for public pension schemes, etc.

Detailed Information 1
Pension Benefits Provided by National Pension Funds

The pension benefits provided by the national pension funds is based on a unit system. The participants are allowed to select the pension amount and the type of benefit according to their individual life plan.

The maximum monthly amount is \68,000.

• First unit--The basic benefit is a monthly pension amount of \30,000 (those who are 45 years old or older at the time of participation receive a different amount of pension depending on their age).
  
• Second unit and onward (the benefit for those who wish to have benefits in addition to the amount of the first unit) --The basic benefit is a monthly pension amount of \10,000 (those who are 55 years old and over at the time of participation receive a different amount of pension depending on their age).
  
• There is a type of pension benefit which provides a bonus benefit.

International Comparison of Pension Systems

Overview
Basic Structure of the Pension Systems of Several Countries

Detailed Information 1
International Comparison of Pension Amounts, etc.

Management of Pension Reserve Funds

Overview

Management of Pension Reserve Funds

Under the public pension schemes, pension premiums reserves are funded to alleviate the possibility of a rapid increase in the premium burden on future generations. It is estimated that the total amount of reserve funds held by the Employees' Pension Insurance and the National Pension had reached approximately \134 trillion at the end of FY1997.

Loans for the Welfare of Insured Persons

All the reserves of the Employees' Pension Insurance and the National Pension are deposited with the Trust Fund Bureau of the Ministry of Finance. They are used as the National Government's fiscal investment and loan programs.

A certain proportion of the reserve funds is earmarked for activities related to improving the welfare of the insured, including housing loans, the Pension Educational Fund Loan and establishment of large-sized recreational bases for the insured and pensioners.

Self-Management of the Reserve Funds

To secure long-term financial stability of the funds for implementing the aforementioned loan programs, the Pension Welfare Service Public Corporation initiated the Project to Secure Financing for Loans to the Insured and Pensioners in fiscal 1986. This program invests a certain portion of the funds and manages the income which accumulates as a result. In addition to that, starting in fiscal 1987, the Project to Secure the Financing for Future Pension Benefit Payment was started to strengthen the financial resources for the Employees' Pension Insurance and National Pension systems. This project invests a part of the deposits with the Trust Fund Bureau and pays the proceeds from the investments to the National Treasury (Special Account for Employees' Insurance and Special Account for National Pension). The total sum of investment is increasing yearly.

Detailed Data 1
Annual Changes in Accumulated Pension Reserves of Employees' Pension Insurance and National Pension

Detailed Information 1
Loans for the Welfare of Insured Persons under the Pension Reserve Funds (Fiscal 1998)

Detailed Information 2
Framework for the Project to Secure the Financing for Future Pension Benefit Payments

Detailed Data 2
Annual Changes in the Amount of Funds Invested

Future Projection of Pension Finance

Overview
Future Projection of Premium Rate under the Employees' Pension

Detailed Data 1
Financial Projection of the Employees' Pension (1)

Detailed Data 2
Financial Projection of the Employees' Pension (2)

Detailed Data 3
Financial Projection of the National Pension (1)

Detailed Data 4
Financial Projection of the National Pension (2)

Pension Counseling

Overview

Pension counseling concerning National Pension and Employees' Pension is available at the Central Pension Counseling Office (3-5-24 Takaido-nishi, Suginami-ku, Tokyo; phone: 03-3334-3131) as well as at the counseling offices of about 310 social insurance offices and 59 pension counseling service centers (for walk-in counseling only) nationwide (Attachment 1). The content of counseling includes: 1 pension system and participation period; 2 projected pension amounts; 3 procedure to claim pension benefit; 4 pension payment; and others.

Those who participate in the National Pension only can receive counseling at municipal halls.

If the insured himself/herself wants to receive counseling, he/she needs to bring a form of identification such as the Pension Handbook, pension certificate or payment notice.

If another person wants to receive counseling on behalf of the insured, he/she needs to bring the written request of the insured.

Counseling in written form is also available.

Attachment 1

Some typical questions concerning participation in the pension system, premiums, pension payments, various procedures, etc. can be answered by the Pension Information Telephone Answering Machine Service (a computerized automated system responding by voice or by fax).

When using the Pension Information Telephone Answering Machine Service, please refer to the "User Manual" and "Question Number list" available at social insurance offices, pension counseling service centers and municipal offices.

Attachment 2

Furthermore,we opened "Social Insurance Agency Pension Website" (see Attachment 3 below) to provide information about pension as well as enable citizens to search the information they want to know through Internet about procedures for confirmation of claims for pension and application, answers for FAQs about pension, and guidance for the pension counseling counters.

Attachment 3
Social Insurance Agency Pension Website URL

Detailed Information 1
Social Insurance On-Line System

Detailed Data 1
Components of Pension Administration Processing