Appended Note 3-4 Ratio of Lifetime Earnings to Pension Premiums and Benefits by Generation
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In order to estimate insurance premiums and benefits in the employees' pension plan in the case where the current level of benefits is maintained while the premium rate is raised, certain conditions were set on model married households, single-person households and economic environments. We assume that people born during the period from 1930 to 2010 are divided into five generations by every 20 years.
1. Model cases of married household and single-person household
(1) Married household
The husband becomes an employee at the age of 20 and retires at the age of 60.
The wife, who is 2 years younger than the husband, is an employee for six years (from 20 to 25 years old) before marriage and as soon as she gets married (at the age of 26) she becomes a category the third insured person (the category of the third insured person system was not in place before 1986, but she does not voluntarily participate in the national pension scheme). She pays national pension insurance premiums for two years after the retirement of the husband.
The qualification period for pension benefits is during their respective life expectancy based on "Population Projections for Japan, January 2002," National Institute of Population and Social Security Research, which is 79 years old for the husband and 86 years old for the wife. The wife receives the survivor's pension for 9 years.
(2) Single-person household
A bachelor who becomes an employee at the age of 20, retires at the age of 60, and dies at the age of 79.
2. Economic environments
In accordance with the "Direction and Points of Contention concerning Pension Revision" (December 2002), the real wage growth is presumed at 1.0% and real investment yield at 1.25% (nominal wage growth at 2.0%, inflation rate at 1.0%, and nominal investment yield at 3.25%) for and after fiscal 2008. For years up to 2007, real wage growth is presumed at 0.5% and real investment yield at 1.25% (nominal wage growth at 0.5%, inflation rate at 0.0%, and nominal investment yield at 1.75%).
When the system is revised next time, the government's share of basic pension costs is presumed to rise to 50% and the employees' pension premium rate is presumed to rise 0.345% (total benefit base) every year until it reaches 23.1% in fiscal 2030. The rate is presumed to remain unchanged thereafter.
3. Calculation of benefits
Assuming that the average monthly pensionable remuneration is 367,000 yen for men and 220,000 yen for women and the basic pension for the elderly is 804,000 yen (all at fiscal 1999 price), the amount put together and multiplied by the investment yield at the age of 65 is converted into fiscal 1999 price by multiplying by the nominal wage growth rate (2.0%) for evaluation.
4. Calculation of insurance premium
We assume that the average monthly pensionable remuneration is 367,000 yen for men and 220,000 yen for women (both at fiscal 1999 price) and that the nominal value of the earnings is previous year's wage x (1 + wage growth rate + growth rate of pensionable remuneration index). The amount put together and multiplied by the investment yield at the age of 65 is converted into fiscal 1999 price by multiplying by the nominal wage growth rate (2.0%) for evaluation.