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Net Pension Liabilities, Intergenerational Equity, and Pension Reforms

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  • Oshio, Takashi
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    This paper examines an ideal pension system that would prevent an increase in net pension liabilities and redress intergenerational inequalities. The direction of pension system reform that this paper proposes is to limit the amount of pension benefits to the sum of premiums, state contributions, and yields on investment of reserves, and also to minimize the burden on the insured of premium payments. This reform would have roughly the same effect as a switchover to a funded system. It will be, however, no easy task to carry out this kind of reform, because the reform requires a politically unacceptable step: to request those generations already receiving pensions and those who have paid pension premiums to accept reductions in the amount of pension that the government has pledged to pay. One possible means to deal with this problem is to withdraw the reserve funds, which are now over 100 trillion yen. However, withdrawal of the reserves would reduce the opportunity of future generations to use the funds and yields on investment of the funds. Any attempt to reform the pension system will cause conflicts of interests between generations. This is why the government should positively disclose the outlook for its pension finance, mainly net pension liabilities, and information about intergenerational disparities to provide the public with data for objective discussions on a more desirable form of public pension.

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    Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number 131.

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    Length: 26, [10] p.
    Date of creation: Dec 2002
    Handle: RePEc:hit:piedp1:131
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