Eliminate disparity between public, private retirement packages
How should the government eliminate the disparity in retirement packages between the public and private sectors?
A government expert panel has compiled a draft plan for reforms of the retirement and pension system for civil servants.
A bill that would unify the pension system for corporate employees and the mutual pension plan for civil servants in October 2015 is expected to be passed by the Diet during the current session as part of the integrated reform of the social welfare and tax systems.
Assuming the two pension schemes are unified, the government panel stated that retirement payments and pension benefits should be regarded as a comprehensive retirement package, and demanded that such packages be more closely aligned with retirement programs offered by the private sector.
We see this proposal as reasonable.
According to a survey by the National Personnel Authority last year, the average retirement pay package for national civil servants--retirement pay and an additional benefit paid under the mutual pension program--was 29.5 million yen, exceeding by 4.03 million yen the average retirement pay and corporate pension benefits of workers at companies with more than 50 employees.
The panel's first proposal was to remove this gap. Retirement benefits for corporate employees have shrunk since the so-called Lehman shock in 2008. In light of this, a significant reduction in retirement packages for public servants is inevitable. We believe the government should make bold cuts instead of acting piecemeal.
End preferential treatment
In integrating the private and public pension systems, the bill calls for abolishing the additional pension payment of about 20,000 yen a month for civil servants, which is seen as a symbol of preferential treatment for public workers. The panel has also focused on discussing how public servants should receive retirement benefits.
The panel has proposed a two-tier scheme in which retirement packages would be provided in a lump sum as well as pension payments, where the total amount is to be on par with private-sector levels.
In the private sector, a combined provision of lump-sum retirement pay and corporate pension benefits is common.
The introduction of a payment scheme similar to that used by the private sector would make it easier for the government to adjust the public-private disparity.
In other words, the panel has proposed the creation of something similar to a corporate pension system for civil servants.
New pension scheme sought
Providing retirement packages to civil servants in two stages would not require any extra public funds compared with paying benefits in a lump sum.
No extra taxpayer money would need to be injected into a corporate-style pension system for public employees.
However, we urge the government to carefully formulate the new pension system and be fully accountable for it to prevent people from viewing it as a different form of preferential treatment for public employees.
Making the pension benefits smaller than the current additional payment of about 20,000 yen is one way this could be accomplished.
If the Diet passes legislation to integrate the two pension schemes, the amount of taxpayer money injected into the mutual pension plan under "additional expenses" would also be cut.
The mutual pension program replaced the "onkyu" allowance system that was financed by tax revenue instead of premium payments.
Even under the current pension system, however, injections of taxpayer money have been necessary to cover pension payments for retired civil servants who worked when the onkyu system was in place.
If the additional payments are cut, about 860,000 retired public employees will have their pension benefits reduced by up to 10 percent.
Measures to remove the public-private retirement benefit gap will be difficult to bear for public servants, but they are inevitable in light of the nation's serious financial difficulties and the tough situation faced by private companies. Swiftly eliminating the private-public disparity is essential.
(From The Yomiuri Shimbun, July 6, 2012)