Pensions...? You Think GPIF Will Pay You Your Pension?

I beg your pardon. But if you thought you are paying into a cleverly thought-out pension scheme. Well, think again.

Link (E) Government Pension Investment Fund

As of April 1, 2006, the new Government Pension Investment Fund (new GPIF) was established as an independent administrative institution with the mission of managing and investing the Reserve Funds of the Employees' Pension Insurance and the National Pension , taking over the responsibilities of the old Government Pension Investment Fund, which was dissolved in March 31 2006.

Propaganda: Dream within a dream - Outside World Tour 1985
Needless to say, the Reserve Funds entrusted to the new GPIF are one of the precious sources of revenue financing the payment of future pension benefits. We, the new GPIF, are determined to make every effort to manage and invest the Reserve Funds safely and efficiently, sticking to the principle of diversified investment from the long term perspective, and implementing appropriate risk management, to fulfill our fiduciary responsibilities.
We also pursue efficient activity administration as an independent administrative institution and disclose relevant information to the public as much as possible.
We shall strive to gain the public trust by becoming an organization that steadfastly achieves its mission through contributing to the fiscal stability of the nation's public pension schemes, thereby better securing people's life. All of us at the GPIF are determined to make every effort to see that this goal is met. In this endeavor, we respectfully ask for your understanding and support.

Video here...

Before that, I'd like to mention

Japan bond market may not survive Japan’s troubled pension system

...And by that, we mean all of those household and corporate savings tied up in JGBs might not survive either.  Time is growing short for Japan to reform its welfare system and its massive debt.  But the recent disaster in Japan has altered the course of needed reform (and by disaster, we mean the Kan administration).  The March 11 disaster has given Kan an excuse to change the concept of reform from that of increasing revenue and cutting payouts to actually increasing the benefits to a wider range of heretofore unqualified persons.  As Societe Generale’s Takuji Okubo explains, this puts not only the pension system, but the JGB market, at risk.

OK, and if that did not make you read any further, here is this:

Abe reforms take aim at Japan's $1 trillion pension fund

TOKYO, July 2 | Mon Jul 1, 2013 5:55pm EDT
(Reuters) - Visitors to Japan's public pension fund can't miss signs of the low-cost, low-return culture that Prime Minister Shinzo Abe seems determined to change with a review of its operations that kicked off on Monday.
There is no receptionist at the dimly lit, 40-year-old Tokyo building where the headquarters of the, occupies the second floor.

The waiting area consists of two mismatched couches. Behind a single closed door, over $1 trillion - equivalent to the annual economic output of South Korea - is run almost on autopilot and invested largely in government bonds issued across the street by Japan's Finance Ministry.
Equally worrying for critics, including members of Japan's ruling Liberal Democratic Party, the fund has no independent board for oversight, no ability to hire in-house fund managers and no record of success during a period of economic growth of the kind Abe has pledged to deliver to voters and markets.
Officials led by chairman Takahiro Mitani say the fund, known as GPIF and which employs less than 80 people, has performed according to the mandate set by its supervisor, the Ministry of Health and Welfare: keep costs down and risks in check.
What happens next, they say, will depend on the reforms the Abe administration enacts in the coming months as it looks to mobilise public savings to help drive Japan out of two decades of deflation and sluggish growth.
"We are the target of a review," Tokihiko Shimizu, the director-general of GPIF's research department told a hedge fund seminar last week, explaining crucial decisions would now be made by others. "We are like the carp on the chopping block."
On Monday, an advisory panel to Abe met for the first time to consider wide-ranging reforms that could see GPIF shift more money into stocks, foreign assets and less conventional investments such as infrastructure funds, as well as emerge as a more independent fund with deeper expertise.
"All we can do right now is calmly wait for the outcome of the panel," Mitani told Reuters in an interview late last month. "We'll obey the government's decision if it decides to change the law or the framework for us to be more aggressive."


In 2010, a report by the Organisation for Economic Cooperation and Development (OECD) said GPIF was being run as a "low profile, low cost and seemingly low risk institution".
The Paris-based think tank recommended a shake-up that would give GPIF full independence from the Health and Welfare Ministry, which was given oversight of the fund in 2001.
Until then, funds had been entrusted to the Finance Ministry. But in the wake of criticism that money was being used to bankroll public sector entities and local government projects, control shifted.
"Almost all the fund management is outsourced and just left up to others. That is no good," said Yasuhisa Shiozaki, an LDP lawmaker and a former official at the Bank of Japan. "It's also crazy that at the top of the structure is the health minister, who has no expertise in fund management."
A prime example of GPIF's conservative approach is asset allocation - changes last month to its portfolio strategy were the first since 2006.
Under those changes, GPIF cut its target allocation of Japanese government bonds to 60 percent from 67 percent and raised its allocation of Japanese stocks to 12 percent from 11 percent. The changes reflected where its portfolio stood and kept it from having to sell stocks and buy more bonds to stay within mandated ranges.
Allocation shifts can be made with the approval of the GPIF chairman and the health minister.


GPIF has been the target of reform efforts before.
Two government-led panels, one in 2008 and the other in 2009-2010, recommended changes including splitting the massive pool of money into smaller funds.
The earlier calls for change went nowhere, but officials involved in the effort say this time is more serious because of Abe's determination to see through a popular economic agenda.
A more aggressive investment portfolio weighted toward stocks -- including foreign assets -- could help bolster sentiment in Japan. It could also weaken the yen, which would help exports.

"It's one of the few levers Abe has," said Itay Tuchman, head of foreign exchange at Citigroup in Tokyo.
GPIF has a target of returning just over 1 percentage point above average wage increases. Wages have dropped by almost 1 percent per year over the past nine years. GPIF's return over the same period averaged 2.4 percent a year.
If the fund's returns falter, the cost of supporting public pensions could rise for taxpayers, payouts could fall or it could be a combination of both as Japan's working population ages and retires, analysts have said.
By one projection, 20 percent of Japan's population will be pensioners over 75 years old by 2030. The share over 65 could be as high as one third of the population.
An economist from the University of Tokyo, Takatoshi Ito, headed the 2008 panel and will lead the latest one. The review would focus on both the fund's investment policy and governance, Ito told Reuters.
"I'm open minded about the types of issues we should discuss," he said on Friday.
The panel has a deadline of the third quarter to reach its conclusions so changes to GPIF and other public pensions that control another $1 trillion can be put in place by April 2015, in line with the government's growth strategy plan.

I beg your pardon, I never promised you a rose garden... Classic hit by Lynn Anderson, 1973.


Pandabonium said…
Infinite growth on a finite planet is not possible. Japan is now more deeply in the hole than most other countries. It won't end well.

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