With the 2004 revision, in calculating the amounts of pensions, and until benefits are balanced with the costs, a system where the growth of the amounts of pensions will be adjusted are utilized rather than direct use of wages and price increases. This system is invoked after exceptional levels are eliminated.

## New System of Adjusting the Amount of Pension (Macro-Economic Slide Formula)

People who newly start receiving pension (new decision recipients): wage growth - slide adjustment rate $ ^{*} $

People who are currently receiving pension (previous decision recipients): price growth - slide adjustment rate $ ^{*} $

* Slide adjustment rate:

Decrease rate of the total number of people covered by public pensions + fixed rate with consideration of growth rate of average life expectancy

Start the adjustment of the amount of benefits in the case where it is anticipated, in the actuarial verification that is held at least once every five years, that keeping the financial equilibrium of pension is difficult throughout the financial equilibrium period, even though keeping necessary amount of pension reserve (approximately one year of the amount of benefit) so as not to be detrimental to pension payment at the end of the approximately 100 years of the financial equilibrium period.

The amount of pension usually increases in response to wage and price increases. However, during adjustment periods of pension benefit, the revision of pension benefit will be reflected in the decrease of the force that bears pension system and growth of average life expectancy so that the increase of the amount of pension shall be suppressed to be lower than the increase of wage and prices. (This system is called as "Macro-Economic Slide Formula")

In subsequent actuarial verification, at a time when the financial equilibrium of pension is anticipated to be sustainable, those adjustments of the amount of benefits shall be concluded.

## Detailed Information 2

## Elimination of Exceptional Level

## Elimination of Exceptional Level

In the past (2009-2011), the amount of pension payments remained unchanged without reduction by applying a price-growth slide adjustment, because of the Special Measures Act. The fall in prices continued and the amount of pension payments remained at 2.5% until September 2013, which was higher than the normal level.

The existence of this exceptional level resulted in an increase in annual pension payments of approximately ¥1 trillion compared to the normal level, with the cumulative total being approximately ¥8 trillion (total of Basic Pension and Employees' Pension benefits payments). These pension benefits payments have been pointed to as being excessive.

With the intention of promptly and systematically eliminating the exceptional level, it was decided to eliminate the exceptional level over the three year period of FY2013 to FY2015. The elimination measure for FY2013 was taken in October.

(Elimination schedule: -1.0% in October 2013, -1.0% in April 2014, -0.5% in April 2015)

Pension amount from April 2014 onward

○ The second exceptional level elimination measure (-1.0%) was taken in April 2014.

○ However, the pension amount is revised in April every year (*) with the trends in prices/wages taken into consideration and thus the reduction rate may be reduced depending on the trends in prices/wages. (*) Revised based on the smaller of: the rate of increase in prices and the rate of increase in wages, in principle

○ Therefore the pension amount from April onward is revised by -0.7%, which is calculated from the exceptional level elimination of -1.0% and the rise in wages of +0.3%.

(case of no increase/decrease in prices/wages in 2014)

Period	Basic Pension	Employees' Pension (standard household*)
From Apr. 2013	¥65,541	¥230,940
From Oct. 2013 (▲1.0%)	¥64,875 (▲¥666)	¥228,591 (▲¥2,349)
From Apr. 2014 (▲0.7%)	¥64,400 (▲¥675)	¥226,925 (▲¥1,666)

(*) A benefit level at which a household, consisting of a husband who worked 40 years for an average income (standard average wage ¥360,000) and a wife who was a full-time homemaker throughout the period, starts to receive pension benefits.