Pension Is Not Like CPF

I’m not sure if the title suggests that I am going to write about how good the pension system is over the CPF system we have in Singapore. In any case, that is not the content here.

Many young people in Japan appear to have little to no knowledge of the pension system in Japan. A very frequent complaint raised is that they do not want to pay for the pension because, due to the Japanese economy, by the time they get old enough to withdraw their pension, the amount they put in would probably be halved. The amount being halved could probably be real, because TV programs say so. However, such analyses do not provide enough information on how the pension system works, and make it sound like a savings plan. The CPF is a savings plan. The pension system is not.

Put simply, whatever amount you are paying into the pension is not the amount you will get in the future. The amount you and everyone else who contribute to the system, are used to pay for the living expenses of the current old. In the future when you get old, the amount you are getting will be from the young who are working and paying into the pension.

The reason why there appears to be trouble in the pension system has less to do with how the economy will do and more to do with the aging population and low birth rate. By the time the current 20- and 30-somethings turn 60, there would be a lot more old people and a lot fewer young people paying into the system to support the old. So what can you do? Give birth.

Perhaps if the government explains this system to the population, more people would be more willing to have children. In a way, it gives their future more hope.

But who gave you the guarantee that you’re gonna live past 60?


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