Social Security Scandal Angers Japanese 

By Mari Yamaguchi, Associated Press

Japan

September 2, 2007

After reading a book this year about serious flaws in Japan's pension system, retired deliveryman Yoshikazu Hirano thought he'd check his own records just to be safe. He's glad he did: The 74-year-old discovered the government had shortchanged him by 460,000 yen ($3,770) in benefits he accrued while driving a truck for three years in the 1950s and 60s.

Hirano wasn't alone. Shortly afterward, the government confessed to losing track of pension records linked to an astounding 64 million claims — igniting a scandal that has punished the ruling party at the polls and eroded confidence in the ability of the world's second largest economy to support its growing legions of elderly.

Hirano, who is single and lives outside Tokyo, felt defrauded. "Had I not asked, I would have never gotten the money back," he said.

The pension mess, fully disclosed in May, has landed on one of the world's fastest-aging societies: 21 percent of its 127 million inhabitants are 65 or older and some 25 million retirees are collecting pensions, rising to 35 million by 2040.

People have flooded pension offices and 24-hour call centers seeking to check their records, and titles such as "Recover your pension!" fill bookstores and newsstands.

The confusion has hit Prime Minister Shinzo Abe. The outrage contributed to a plunge in his popularity and forced him to delay an upper house election for a week — to no avail, since his ruling party was trounced at the polls anyway, though he remains in office.

An interim government report released in July alleged widespread incompetence at the Social Insurance Agency: records kept in yellowing files instead of on computers, evidence of possible embezzlement of funds, and rampant clerical mistakes.

"The organization had little sense of compliance," said the report, which blamed the mess on faulty governance, low morale, lack of professionalism and ignorance of "the duty to protect the people's rights."

The agency was established a decade ago to unify three separate pension organizations — one for self-employed or non-workers, another for company employees, and the third for public servants. With 70 million members and $1.3 trillion in reserves, it is one of the world's largest.

The panel found internal agency documents indicating embezzlement of pension money by employees. But the fund's flaws were largely clerical; it failed to properly match some 50 million claim records with the correct individuals, and more than 14 million records aren't computerized, meaning they can't be readily retrieved when claims are submitted.

The government has not released an estimate for the number of people affected or amount of money involved, so estimates of the sum in limbo fluctuate widely, between $25 billion and $175 billion.

Hirano has recovered his missing money in a one-time payment, but his case is rare. The agency says it has cleared up only about 40 cases since the scandal erupted.

It's not the first time the agency has been in trouble.

In 2004, a series of scandals led to the arrest of a senior official on bribery charges. A string of agency-run resorts have suffered massive losses. In 2005, the agency disciplined nearly 3,300 staff for various types of misconduct including accepting questionable gifts and money from office suppliers, an agency report shows.

With his job on the line, Abe has promised to rectify the problems within a year and "squeeze out the pus" ahead of the agency's partial privatization by 2010. The agency chief has been fired.

But many remain leery of the agency.

Three years ago it was revealed that many top politicians had skipped their contributions, highlighting concerns over the system's solvency and prompting a growing number of self-employed, students and non-working to stay out of the system altogether.

Pension payment is mandatory for all Japanese from age 20 to 60. An average company employee pays more than 6 percent of a salary and can expect about $1,450 a month after retirement, usually at age 65.

The growing number of nonpayers has pushed the agency to go after them more aggressively. Last year, the agency mailed collection letters to 310,000 nonpayers and seized assets from 12,000 of them. Today the employee pension is covered almost 100 percent but its revenue is decreasing.

Hirano, the ex-deliveryman, was helped by Tomoichi Shibata, a social insurance consultant who calls himself a "pension detective" and says he has helped more than 2,000 pensioners win redress.

"Ideally, my business wouldn't have to exist if the government operated the pension program properly," he said
 

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