Richest EPFs proving the most difficult to rehabilitate

The 2012 collapse of AIJ Investment Advisors rang the death knell for EPF-type (Kigyō Nenkin) retirement schemes (see archive 2012-10-24 AIJ collapse brings an end to Employee Pension Funds).

These plans were already being replaced with fund- and covenant-type defined-benefit structures by companies who no longer wanted to support the government element of EPFs or had Tax-Qualified Plans (TQPs) which were being officially phased out.

The only EPFs to linger on are multi-company, single-prefecture, single-sector affairs for which Ministry of Health, Labour and Welfare must try resolve the remaining solvency and administrative issues.

It is becoming clear that while these issues may be large the assets involved are huge.

Figures published recently by the Life Assurance Association show that of 13,540 DB funds  in existence at 31 March 2017, trust banks were acting as sokanji (roughly ‘organiser’ but in practice more than that) for 3,808 while 9,379 were in the hands of life cos.

The numbers also show that the DBs administered by trust banks had 43,931 billion yen in assets while those with life cos had a much more modest 15,062bn yen since most of their sponsors are small firms. (Zenkyoren handles the investments of agricultural co-operatives.)

That gives an average worth per DB pension fund of 1.61bn yen each for those with insurance companies and 11.54bn yen each of those looked after by trust banks.

Yet the 110 remaining EPFs have average assets of almost ten times that at 173.38bn yen each.

Will this amount survive the unwinding process? Perhaps a better question would be ‘by how much will this reduce during the unwinding process?’

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012




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