RENGO s Views on the Pension System Reform

Transcription

1 Ageing Societies in Europe and Japan: Policy Responses and Research & Innovation Solutions for Active and Healthy Ageing g RENGO s Views on the Pension System Reform Akihisa Ito, Director of Welfare Division, Japanese Trade Union Confederation (RENGO)

2 Public pensions: The pillar of senior citizen income 70% of senior citizen income is from public pensions, 60% of senior citizen households live on pension income alone Pensions are security for social insurance; public medical and long-term care insurance premium payments Ensuring stable provision and sustainability of public pensions is important for security in the lives of senior citizens Remittances, corporate pensions, personal pensions, etc. 5.7% Property income 5.9% Earning income 17.3% Average annual income per person in senior citizen households million yen Social security Less than benefits 20-39% 20% other than 6.1% 2.8% public and government pensions 0.8% 40-59% 8.3% Public and government pensions 70.3% 60-79% 9.4% 80-99% 9.9% Proportion of public and government pensions in total income Public and government pensions only, 63.5% Comprehensive Survey of Living Conditions of the People on Health and Welfare for 2010, Ministry of Health, Labour and Welfare Comprehensive Survey of Living Conditions of the People on Health and Welfare for 2010, Ministry of Health, Labour and Welfare 2

3 Hollowing out of the public pensions system Increase in persons not paying insurance premium payments Leads directly to senior citizens with low or no pension Imbalances in burdens and benefits due to type of employment and institutional gaps The falling trend in payment rate of the national pension insurance premiums shows no sign of easing, and was 58.6% in FY2011. Among those not paying are many employed workers who are not covered by employees pensions. People not paying premiums are likely to have low or no pensions in the future. The pension system, including the Category 3 insured persons system, is not neutral with respect to working style or lifestyle 68.0 % The continuing fall in national pension insurance premium payment rate

4 The pension system aimed at by JTUC-RENGO Realization of a truly national pension for all whereby all people participate in the same pension system regardless of working style or employment system Hold fast to 65 as the pensionable age, and maintain the standard pension level at an income replacement ratio of 50% Specific reforms First stage of the reform Change all financial sources for the basic pension to tax. One half from the general account budget and one half from a tax exclusively for social security purposes. The benefit level for the basic pension should be around 70,000 yen/month. Basic pension should be clawed back from households above a certain income level (self-employed or employed households). E.g. the Canadian system. All employed workers should in principle be covered by employee s pensions. Employee s pensions (employees pension plans, mutual aid pensions) should be unified. The labor-employer burden ratio for earnings-related pensions should be 45% for workers and 55% for employers. Second stage of the reform Create an earnings-related pension system for the self-employed and unify all pension systems. Change the basic pension to a guaranteed minimum pension and supplement earnings-related pensions with this. The benefit level of the guaranteed minimum pension should be around 70,000 yen/month. Pension rights under the old system should be respected in the transition to the new pension system. Consensus building should be carried out by securing the participation of a wide range of stakeholders discussing the issues in a National Council on Social Security Reform. 4

5 First stage of the reform Earnings-related pension Claw-back Earnings-related pension Claw-back Basic pension Basic pension <Employee> Tax as sole financial source for the basic pension Unification of employees pensions Claw-back also applied to the self- employed, etc. 所得比例年金 Earnings-related related pension Basic pension <The self-employed, etc.> Income supplement for the selfemployed, etc. Creation of an earnings-related pension for the self-employed, etc. All pension systems unified Claw-back <Unification> Transform the basic pension into a guaranteed minimum pension Claw-back Second stage of the reform Guaranteed minimum pension Earnings-related pension <Unification> 5

6 JTUC-RENGO s views on individual id issues (1) Raising the pensionable age <State of deliberations in the Social Security Council> The pensionable age is to be raised to years The schedule for raising the pensionable age for employees pension plans (second-tier component) is to be brought forward from once every three years to once every two years. <JTUC-RENGO s views> We find this unacceptable. While the senior citizen employment environment is still not properly organized, this is not the time to be considering a rise in the pensionable age. Bringing forward the schedule of the rise in pensionable age of the employees pension plans (second-tier component) will have a huge impact on people who are currently in work and who have designed their old-age lifestyle on the basis of the current schedule. We also oppose this because altering the schedule part way through h the rise in pensionable age will cause people to lose confidence in the pension system. 6

7 JTUC-RENGO s views on individual id issues (2) Review of the macroeconomic slide <State of deliberations in the Social Security Council> End the special exception level of the consumer price index adjustment over three years Reduce basic pension benefit due to application of macroeconomic slide Introduce a mechanism for invoking the macroeconomic slide under deflationary conditions (= removal of the nominal lower limit) <JTUC-RENGO s views> From the viewpoint of the institutional purpose of the consumer price index adjustment to maintain real purchasing power, the special exception level of the price index adjustment should be ended. However, deliberation is necessary on how and when to bring it to an end. After the end of the special exception level, it will be possible to invoke the macroeconomic slide under the present law, but since the basic pension has the function of securing the basic portion of daily life costs, the reduction of benefits by the macroeconomic slide should not be undertaken. In the government s reform of the pension system in 2004, the invoking of the macroeconomic slide under deflationary conditions was not considered. d Moreover, we are opposed to this change because it will be difficult to maintain a 50% income replacement ratio in the case that the invoking of the macroeconomic slide is enabled in a situation of continued deflation. 7

8 JTUC-RENGO s views on individual id issues (3) Review of pension benefit receipt by high-income income earners <State of deliberations in the Social Security Council> Review of basic pension benefit received by high-income earners who have an annual income of 10 million yen or more. <JTUC-RENGO s views> We approve of a reduction in public finance burden for the basic pension in accordance with income for high-income income earners exceeding a certain annual income. 8

9 JTUC-RENGO s views on individual id issues (4) Expansion of application of social insurance <Unified reform of social security and tax> Expand application of social security to the 250,000 workers who fulfill such conditions as working for 20 or more hours a week, receiving a monthly wage of 88,000 yen or more, or who work for companies with 501 or more employees. Enforce from October Reconsider the situation within three years after enforcement and put new measures in place. <JTUC-RENGO s views> The pension system should be reformed to cover in principle all employed workers through employees pension plans in order to give equal treatment to a) part-time and dispatched workers and b) all employed workers in small, medium and individual businesses, and to redress such problems as the hollowing out of pensions and illegal withdrawal from the pension system. For the time being, employees pension plan coverage should be applied if either of the following conditions are met: a) the application criterion i for the working hours condition is one-half (20 hours) or more and/or b) the annual income condition is 650,000 yen or more (the minimum guaranteed wage that is deductible from taxable income). 9

10 JTUC-RENGO s views on individual id issues (5) National contribution of ½ of finances for basic pension < Unified reform of social security and tax > From FY2014, the national contribution of 1/2 should be made permanent through the upcoming consumption tax increase. A separate legal measure will be considered for the national contribution of 1/2 for FY2012. <JTUC-RENGO s views> Stable financial resources should be secured through tax reform, including strengthening the progressiveness of income tax and strengthening inheritance tax. (Financing basic pensions only through tax) Financial resources for basic pensions should be reliably secured even before the drastic reform of the tax system. 10