Pension questions

[RetireJapan]

Well, even at the moment nenkin isn't exactly generous. You could live on it, but not very well. Kokumin nenkin is a maximum of 65,000 yen a month. Kosei nenkin depends on how much you pay, but is unlikely to be more than 200,000 a month. And those are current figures, likely to be slightly lower in the future.

There was a government report last year that said that, based on average pensioner spending, a married couple should have 20 million yen in savings to supplement their nenkin. Obviously how much you need to have a fulfilling life is going to depend on your lifestyle, but I strongly believe most people should be saving a lot for retirement, and treating nenkin as an income floor or basic living expenses while using other investments/income to supplement.

And of course this would also be true in almost any other country too.

[Zoomtokyo]

"japan currently has a pension fund"...

The GPIF is used for investing the revenue collected from our contributions. It consists nearly 100% of securities, so it can't be used for paying benefits. Otherwise, pensioners would be receiving stocks and bonds rather than cash.

When the govt pays the benefits, it merely makes an electronic transfer to our accounts out of thin air, rather than transferring cash out of a fund. That's why the nenkin system can't go bust -- unless politicians want it to go bust.

[TokyoWart]

"japan currently has a pension fund"...

The GPIF is used for investing the revenue collected from our contributions. It consists nearly 100% of securities, so it can't be used for paying benefits. Otherwise, pensioners would be receiving stocks and bonds rather than cash.

When the govt pays the benefits, it merely makes an electronic transfer to our accounts out of thin air, rather than transferring cash out of a fund. That's why the nenkin system can't go bust -- unless politicians want it to go bust.

Funds like GPIF or the US Social Security Trust Fund are reserve funds which hold the cumulative excess of cash taken in from the payments withheld from our paychecks minus payments to retirees. As long as the amounts withheld from employees are greater than the amount needed for retirees there's no need to cash in any of the reserve fund investments and in addition the equity and bond holdings in the GPIF generate a fair amount of income. I don't think this is the part of government which creates cash out of thin air. When the Bank of Japan buys equities in the Japanese stock market or JGB's it is creating cash out of thin air.

[Beaglehound]

I didn’t actually know that Japan had an actual pension fund. Being a Brit, I am used to governments living hand to mouth without bothering with anything as trivial as proper savings. Pretty much like the general UK population, who’d have thunk it!?

I am not as pessimistic as many about state pensions in general, though I guess I might worry more if I actually understood the figures/calculations behind them. My starry eyed thinking is based on the voting public only getting older in developed nations, and they turn out to vote, meaning that governments have a strong vested interest in maintaining systems without drastically detrimental changes.

[Zoomtokyo]

the cumulative excess of cash taken in from the payments withheld from our paychecks minus payments to retirees

If that's true, that is very good news, since the fund's size has been steadily growing over the years. So much for the argument that Japan's state pension system is "under strain" or "set to implode," etc.