In May 2020, the Japanese National Diet passed pension system reform legislation broadening the eligibility of part -time workers – mainly women and the elderly – for the public pension system and raising the maximum age to start receiving benefits to 75 from the current 70. Issues surrounding the “super-aging” society are among the most pressing public policy priorities in Japan, and this latest legislative change is just one of many attempts to reform the country’s pension system. Japanese retirees have long relied on the public pension system to fund their post-retirement living. In this super-aging society, however, sole reliance on the public pension system is not sustainable; a joint solution leveraging both the public and private pension systems will be essential to secure retirees’ financial wellbeing.

THE CHALLENGE

1. JAPAN’S PENSION SAVINGS GAP As of 2018, over 28% of the Japanese population is aged 65 and over. This percentage is projected to further increase to 30% by 2025 and 39% by 2065 (1). Currently, about half of retirees rely on the public pension distribution as their sole source of income, even though the public pension only pays about 62% of preretirement income.

By 2058, average households are projected to receive 20% less income from the public pension system (2,3). The Japanese public is well aware of this retirement income challenge, but remains heavily reliant on the public pension system and has not ma de a significant shift to add private savings.

According to a survey conducte d by the Japan Association for Financial Planners, over three-fourths of respondents were “concerned for post-retirement life,” with respondents in their thirties and forties being highly concerned (85 % and 83%, respectively). While financial concerns were a major contributing factor to their responses, only around 30 % of the respondents chose “start accumulating assets early” as a solution to these concerns (4).

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