16/07/2019

A crown upon your lifetime's effort

Rankings: Highest life expectancy

Last month Japan’s Financial Services Agency, the financial-industry regulator, lobbed a grenade into a fractious debate on how to support the world’s oldest population in retirement. The typical elderly couple, it warned, will need to top up their public pensions by a whopping ¥20m ($185,000). This gloomy forecast should have come as no surprise. The system was built on the expectation that people would live until their 70s or 80s. But more than half of Japanese babies today can expect to live to over 100. A quarter of all 60-year-olds will still be alive in 35 years, estimates the government.

All 20- to 59-year-olds in work must pay a flat premium of ¥16,410 into the national pension fund every month. Those who do so for 40 years get a full pension, currently ¥780,100 a year. Corporate and government workers also make payments into supplementary schemes. But the system is imbalanced, with shrinking numbers paying in and growing numbers drawing out. Japan already has more than 35m people aged over 65—28% of the population. The share is projected to reach a third by 2050.

Japan is a harbinger of changes to come elsewhere. The World Bank forecasts a shortfall in retirement savings in big countries of about $400trn by 2050. More adventurous investment may be part of the solution. Japan’s government also wants to raise the retirement age from 65 to 70. But with a general election approaching next week Shinzo Abe, the prime minister, may not have felt able to point that out.

This extract is from our Graphic detail blog.