Abstract
The objective of this paper is to analysis public policies on the income security of the retired in Japan and point out some problems in comparison with public policies in U.S. and U.K. We would give suggestions for the policy to induce the demand for insurance products and individual annuities.
After the public pension reform 2004 in Japan, it is expected that the income replacement ratio and the percentage of the amount of benefit paid of total after-tax income of existing employees will decrease, as population aging progresses and the birthrate keeps declining.
It is crucial for us to supplement the reduced benefit of public pensions to keep the income level of the retired constant. I think it is effective for promoting the retirement saving to utilize tax expenditures.
In Japan, individual annuities and DC type plans are not prevailing owing to insufficient tax preferred treatments, especially comparing with the status in U.S. and U.K. We point out the tax expenditure budget in Japan is extremely unbalanced and biased toward tax exemptions of housing. I think it’s important to resolve this unbalance to induce people in work to preparing for post-retirement life properly. At the same time, it is most important to evaluate the tax expenditures to utilize the promotion of private pensions, individual annuities to overcome longevity risks in Japan.
