TRUST THE PENSION SCHEME - not! (Patreon)
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One of the many reasons govts try to pretend inflation is really low - entitlements & pensions
TRUST THE PENSION SCHEME AND YOU ARE SCREWED-EVEN IN JAPAN Japan is expected to curb the increase in national pension payouts for the second year in a row using an adjustment that reduces benefits when compared against rising consumer prices, Nikkei has learned*.
Benefits will grow by an estimated 2.6% in fiscal 2024, leaving recipients somewhat worse off after inflation.
Public pension benefits in principle rise along with inflation and wage growth so that pensioners can maintain purchasing power.
But the number of pensioners is swelling while the working population shrinks, putting strain on the system. The government introduced the "macroeconomic slide" in fiscal 2004 to keep benefit rises below inflation and wage growth.
After the fastest inflation in decades, the government plans to use the macroeconomic slide again for fiscal 2024.
Benefit increases differed in fiscal 2023 for people 68 and older versus recipients 67 and younger. For fiscal 2024, which begins in April, the payout increase would be 2.6% across the board, according to estimates by Kunio Nakashima, senior researcher at the NLI Research Institute in Tokyo.
The estimates assume inflation of 3.1% and wage growth of 3.0% for the 2023 calendar year. The macroeconomic slide will subtract 0.4 percentage point from the unadjusted benefit increase, according to Nakashima The estimates project that inflation and wages will continue to rise, and that the macroeconomic slide adjustment will be triggered each year through fiscal 2027. Under that scenario, pension benefits would be 0.8 to 1.0 percentage point less than the inflation rate. The Ministry of Health, Labor and Welfare is expected to announce the change to pension payments in January.
The macroeconomic slide is designed to help keep the pension program stable by placing limits on benefits in a way that lessens the burden on workers who pay into the system.
h/t to Sanjay for sharing