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Fiscal System

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Fiscal System

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Standard monthly income

The basis for calculating contributions and benefits, standard monthly income is the amount obtained by dividing, by 12 months, the total taxable income paid the previous year based on laws on civil servants’ remuneration, excluding the 8 remuneration types and adding the average of the 8 remuneration types by job type and class, and multiplying the figure by the percentage increase in civil servants’ remuneration 8 remuneration types: performance-based annual salary, performance-based bonus, bonus, joband performance-based bonus, overtime allowances,night-time dutyallowances, holiday allowances, compensation for unused annual leavesand other equivalent allowances

Civil servants’ contributions

  • The amount of money paid by civil servants, which are expenses incurred in providing the provision of benefits
  • The amount civil servants pay each month from the month in which the date of his or her appointment falls to the month in which the day preceding the date of his or her retirement or the date of his or her death falls (9% of standard monthly income)

The Government’s pension contributions

  • The amount of money paid by the State or a local government, which are expenses incurred in the provision of benefits (9% of the remuneration budget)
    • Cost funding methods for the pension system include the contributory system and non-contributory system. A contributory system refers to a system where the costs for pension benefits are shared by state or local governments and civil servants, whereas a non-contributory system refers to a system where civil servants do not share the cost, and the state or local government pays for the entire cost.
    • Financial management methods for the pension system include the funded system and pay-as-you-go system. A funded system builds a reserve with standardized insurance premiums during the subscription period for benefit payout in the future. Meanwhile, a pay-as-you-go is a method of financing the benefits to be paid during a certain period of time within the same period. It does not build a reserve and even when it does, the reserve is only for the risk of temporary overspending.