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June 2012
From The Director

Greetings,

For all of its problems, it's hard to remember a time when Japan's poorly managed pension system was not a topic of great concern.  With the recent AIJ scandal, its become much worse.  In this month's article, we'll take a look at the basics of the pension scheme, and why AIJ may possibly cause a chain reaction of financial catastrophe for a large number of Japan's pensioners and small businesses.
 
As always, we welcome your feedback. If you have any questions or would like additional information, please do not hesitate to contact your financial advisor. Should you not currently have an advisor at Select, please reply to this email and one of our senior consultants will contact you promptly.

Best Regards,

Imants Katlaps
Managing Director

Article

With an aging population, a decreasing birth rate, and the baby-boomer generation about to retire, you’re sure to have some idea of the depth of the AIJ scandal involving the loss of pension funds for some 880,000 Japanese.  Just how did something like this happen and what will it mean for these pensioners?  This article will simplify the background of the Japanese pension system and explain how mismanaged funds could produce disastrous results for retirees expecting to live on their pensions.

The Japanese pension system is comprised of both a national pension insurance (kokumin nenkin) and an employees’ pension insurance (kosei nenkin).  To briefly explain them both:

  • National pension system…

All residents of Japan (between the ages 20-60) are required to pay into the national pension scheme.  This includes foreign residents.  The aim of the national pension is to provide a basic pension to all residents, falling into 3 categories:

~Disabled – paid under certain conditions when a pensioner becomes disabled
~Bereaved – paid to pensioner’s wife and/or children should the pensioner die
~Elderly – paid, in principal, when the pensioner reaches 65 years old

  • Employees’ pension system…

This pension system is mainly for those who are employed by private companies.  Pension premiums are deducted from his/her salary.  When one is enrolled in the employee pension system, he/she is automatically enrolled in the national pension system as well.   As such, he/she would be entitled to higher pension payments in the future.

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