Retiring late: As pensions underwhelm, more Japanese opt to prolong employment

SKYLARK HOLDINGS

10/04/2019 06:27

* Japan's elderly dependency ratio at highest among OECD
members
    * Abe's govt mulls raising retirement age to 70 or higher
    * Worries on pension, retirement income drive elderly to
work

    By Tetsushi Kajimoto
    TOKYO, April 10 (Reuters) - Yasuhiro Furuse could have
retired two years ago, but he wasn't entirely happy with his
pension income and had to put any such thoughts to bed.
     It was just as well for Furuse's employer Orix Corp
 8591.T , a financial services group, which would have struggled
to find a replacement, with Japan's jobless rate at 26-year
lows. 
    This win-win arrangement, increasingly common in Japan,
highlights a structural and policy challenge facing the world's
third-biggest economy.
    Prime Minister Shinzo Abe's government is considering
raising the retirement age to 70 or 75 from 65 now, to ease
pension burdens as well as a labour crunch. But a more durable 
longer term solution, analysts say, is for Japan to relax its
strict controls on foreign workers.
    "I have no choice but to work," said Furuse, 62, a senior
adviser at Orix's corporate business headquarters. 
    "I appreciate that I could keep working, which makes me
better off than living on pension and savings. Besides, I want
to do something to contribute to society."
    Japan's population is among the oldest on the planet and has
one of the longest lifespans, putting pressure on its pension
system. The old-age dependency ratio -- or the numbers of
elderly against those of working age -- is the highest in the
OECD.
    The situation is being compounded by Japan's deep-seated
reluctance to fully open its gates to foreign workers, leaving
many companies to rely on the old guard to overcome severe
labour shortages.
    On top of that, a lengthy spell of monetary easing by the
Bank of Japan to battle deflation and spur growth has led to
near-zero bond yields and crippled savings.
    
    INVESTING IN OLD AGE
    The current law requires companies to allow employees to
work until 65 if they wish. In practice, most companies, trying
to keep a lid on labour costs, set a mandatory retirement age at
60, with an option of further five years' work on reduced pay.
    That is changing. 
    Orix has raised the mandatory retirement age for its
employees to 65 from 60. Some other firms such as Taiyo Life
Insurance and restaurant chain Skylark Holdings Co  3197.T , now
also allow staff to work until 65, or 70 if employees wish.
    "We will raise the retirement age to 65 to ... cope with a
decline in the workforce," Nippon Steel Corp  5401.T  said in a
statement this month.
    Mayumi Waki, a human resources manager at Orix, says the
move was worth the extra spending. The older workers seem more
motivated, the firm can benefit from their client relationships
for longer and younger talent has more mentors available.
    "We don't consider raising the retirement age as a cost but
a necessary investment," Waki said.    
    To keep costs under control, Taiyo Life has changed the
company's pay review processes to be more focused on merit, and
less on career length - another change in culture which is being
increasingly adopted throughout Japan.
    
    RETIREMENT AT 70?
    Over 8 million Japanese workers are 65 or older, a
staggering 12 percent of the entire workforce, government data
shows. The old-age dependency ratio is over 50 percent, and is
expected to rise to nearly 80 percent by 2050, the OECD says.
    The average employee pension in Japan is about 150,000 yen
($1,350.01) a month, lower than government's target of 60
percent of the pre-retirement income for salaried workers, which
would be 220,000 yen on average.
    Some economists expect the average pension-to-wage ratio to
keep deteriorating and worries are growing that Japan's
'pay-as-you-go' pension scheme may be unsustainable, with fewer
workers paying into it and more elders drawing from it.
    In a significant move, immigration-shy Japan is taking
tentative steps to let in more foreign, blue-collar workers to
ease the labour shortage.  urn:newsml:reuters.com:*:nL4N1YC1ZX
    Other labour reforms also kicked in this month to curb
overtime and promote more flexibility, such as shorter days or
working from home, with some analysts saying this could
encourage more women and retirees to look for jobs. 
    Cutting back on Japan's notorious long hours at work may
also make longer careers easier to sustain, analysts say.
    "The era of retirement at 70 will come sooner or later,"
Taiyo Life's chairman Katsuhide Tanaka said.
    ($1 = 111.1100 yen)

 (Reporting by Tetsushi Kajimoto; additional reporting by Izumi
Nakagawa; Editing by Marius Zaharia and Shri Navaratnam)
 ((tetsushi.kajimoto@thomsonreuters.com; +81-3-6441-1829;
Reuters Messaging:
tetsushi.kajimoto.thomsonreuters.com@reuters.net))