Household pension benefits to drop to 40% of average income in 20 years, ministry says

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Household pension benefits to drop to 40% of average income in 20 years, ministry says

THE ASAHI SHIMBUN

2009/5/25

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The average household that starts receiving public pension benefits this fiscal year will see the payment level drop to about 40 percent of average working household incomes in 20 years, the welfare ministry said.

For households consisting of a man living alone or a working couple, the amount of benefits from the kosei-nenkin pension program for company employees will fall below 50 percent of the average income when they first receive payments, the ministry's estimates show.

The Ministry of Health, Labor and Welfare's model household comprises a company employee on an average income who has subscribed to the pension program for 40 years, and a wife of the same age who has been a homemaker since marriage.

In February, the ministry concluded that a model household would be able to secure pension benefits that are at least 50.1 percent of the average income of working households in the first year of payments.

The ministry's latest estimates include the amount of annual benefits over a 20-year period.

If the household begins receiving benefits in fiscal 2009 when the couple reach the age of 65, the payments will be 223,000 yen a month, or 62.3 percent of the average income of working households.

When the couple become 85 years old, the pension amount will be 199,000 yen in terms of current values, or 43.2 percent of the average working household income.

The ministry's estimates in 2004 showed that a model household would start receiving pension benefits equivalent to 57.5 percent of the average income of working households.

When the couple reach 85 years old, the amount was 41.8 percent, according to the 2004 estimates.

Therefore, the latest estimates represent a nearly 5-percentage-point rise in the first-year benefits of the model household.

However, the rise was mainly led by the current decline in household income.

After households begin to receive their benefits, the amount changes each year depending on price movements.

The ministry's latest estimate is based on the assumption that consumer prices will rise by 1 percent annually while average household income will increase by 2.5 percent.

The expected decline in the ratio of benefits over the years is also the result of 2004 legal revisions intended to curb pension benefits to prevent the rapidly aging society from draining welfare coffers.

A household of a couple who both work full time will receive first-time pension benefits of 279,000 yen in fiscal 2009, or 48.3 percent of the average income of working households, according to the latest estimates.

For a household of a man who has been living alone since he joined the pension program, the corresponding figures will be 157,000 yen, or 43.9 percent.(IHT/Asahi: May 25,2009)