Corporate pension age ‘to rise to 65’

The government will raise the eligibility age for a corporate, defined contribution pension plan from the current 60 to 65, chiefly in response to an increase in the number of employees working past the standard retirement age of 60, sources said.

Should the eligibility age be raised for the plan–a Japanese version of the U.S. 401K corporate pension plan–the accumulation period for financial contributions would be extended, thereby increasing the amount that pensioners could receive during retirement.

To raise the eligibility age, the government will submit a bill to revise the Defined Contribution Pension Law during the ongoing ordinary Diet session, according to the sources.

There has been an increase in companies that employ workers past 60, by extending the retirement age ceiling or rehiring retired employees.

The trend is attributable to the fiscal 2006 enactment of the revised Older Persons’ Employment Stabilization Law, which requires companies to extend, in stages, the employment age of workers up to 65.

However, under the current corporate pension plan, employees who turn 60 must leave the plan. This has prompted calls to raise the eligibility age for making financial contributions to 65.

The government plans to implement the age hike in April 2012. The qualified retirement annuity system, which has been adopted mainly by small and midsize companies, is to be abolished at the end of March the same year, making it necessary to improve the corporate pension plan to accept those workers covered by the system.

The revised plan also will make it possible for workers themselves to financially contribute to the plan. Under the current system, only companies can contribute.