Average Japanese Pension Fund 96% Funded

In a Greenwich Associates press release, consultant Dev Clifford pointed out the funding of pension obligations has come a long way since a 65% funding level in 2003. The firm attributes the rise to an improving Japanese economy and a rebounding equity market.

As a result of robust market returns and the strengthening economy giving corporate plan sponsors the breathing room to increase contribution levels, more than half of Japanese corporate pensions are now funded at more than 90% and the overall funding position of Japanese corporate pension plans is considerably stronger than that of pensions in the United States and Europe, the release said.

The number of DB plans that closed their doors to new employees inched up from 12% in 2005 to 13% in 2006. However, the number of sponsors that intend to close their plans to new employees in the next three years fell from 11% in 2005 to just 3% in 2006.

Meanwhile, the research showed Japanese employers are increasingly moving toward defined contribution plans, with the number of DC plans increasing from 16% in 2005 to 20% in 2006. The number of plan sponsors saying they expect to adopt a DC plan for employees in the next 12 months rose from 4% to 5%.

The study was based on 352 interviews with the largest corporate pension funds, public pension funds and financial institutions in Japan.

For a copy of the report, contact Joan Weber at  jweber@greenwich.com .