In Japan, the legal age of retirement could be pushed back to 70 years

The ambition of the government of Shinzo Abe is accurate. In his vast plan called "Towards an era in which one lives 100 years", the japanese prime minister i

In Japan, the legal age of retirement could be pushed back to 70 years

The ambition of the government of Shinzo Abe is accurate. In his vast plan called "Towards an era in which one lives 100 years", the japanese prime minister is planning to bring the age of perception of retirement at 70 years of age, in order to "stimulate growth, increase tax revenues and generate more revenue for social security." "I want to put in place a system where people have the choice to start their retirement even after 70 years", explained already last November the head of the government.

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The executive will present its project of reform of the pensions system on January 28, while negotiations with the companies should be completed next summer.

the ageing of the population weighs on the public finances

By postponing the retirement age to 70 years, Shinzo Abe wishes to address the fiscal problems of the country caused by the rapid aging of its population and a consequent decrease in the birth rate . With a fertility rate of 1.43 children per woman in average, the generation renewal is not assured, and the Japanese aged less than 64 years old represent more than 60% of the total population.

This aging generalized weighs in on public spending and exploded the social security budget. Last year, the costs of the latter accounted for a third of the State budget, up from 17% twenty years ago. By perpetuating the system of current retirement, seniors may be very costly to the State in payment of pensions, while the country is facing a public debt exceeding 250% of GDP. With this new pension reform, the government wishes to "reorganize the social security system to reassure everyone: children, parents, and active seniors", said in September 2018 the prime minister.

companies welcome the reform with distrust

According to a survey conducted for the government, the reform would be greeted with enthusiasm, two out of three Japanese over the age of 60 wishing to work after age 65. But it seems that the difficulty for the government is on the side of the companies. The negotiations are indeed perilous, as the system currently in force allowed employers to retain their older employees while reducing their wages in a significant way.

In Japan, and this since 2006, when the workers of japanese have until age 65 to collect their full pension, the majority of companies generally set the retirement age at 60 years for the salaries of seniors do not weigh on their finances. In fact, if the employer asks an employee to leave the company before age 65, last may, exceptionally, receive his / her retirement, but undergoes a reduction of its amount. The private sector workers who retire at age 60 may for example receive no more than 70% of their monthly pension.

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But, faced with the shortage of labour linked to the demographic decline, japanese companies are driven to re-employ these neo-pensioners up to at least 70 years, offering insecure contracts less well-paid. With this new legislation, the government wants to encourage companies to keep their employees longer, with a status less precarious, to bail out the social security funds. To pass the reform, the increase of the retirement age will be phased in and the government is also considering the creation of a system of financial support to companies.

12,5% of the active population is over 65 years old

Japan holds the record for the number of senior workers of the member countries of the OECD, and the longest life expectancy estimated at 84 years of age. According to statistics from the Ministry of Labour, 8.1 million Japanese over the age of 65 are in work, and these account for over 12.5% of the total working population. Last year, more than half of men and over a third of the women aged 65 to 69 were still employed. The employment rate for 65-69-year represents a ratio much higher than that of other developed countries. With this new reform, the japanese government therefore wishes to undertake a cultural revolution of its business model, making its population senior of a work force as the other in the eyes of businesses.

The decision to push back the retirement age could inspire other countries that will face soon problems related to the ageing of their population. In France, the employment rate of 65-69 is only 6%, and the government is also considering raising the age of retirement, currently set at 62 years. This Tuesday, Jean-Paul Delevoye, High commissioner to the pension reform, has proposed that future retirees who will retire after 62 years old would receive a premium for their pension. This bonus would then be 3 to 5% per year of additional work.

Updated Date: 23 January 2019, 00:00

Kathleen Lees


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