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Japan
Pension fund reform
The Administrative Reform Council, with support from the Ministry of Finance, has approved liberalising regulations governing tax qualified pension plans (TQPPs) - plans mainly used by foreign subsidiaries - from 1 April 1997. Previously, all pension plans had to conform to the so-called '5-3-3-2 rule' which specified that at least 50% of the pension fund needed to be in fixed income investments, with a 30% limit on real estate, a 30% limit on equities, and a 20% limit on foreign investments. Changes being introduced include:
- Elimination of investment restrictions for trust banks and life office separate accounts.
- Change in the statutory basis for contributions to allow the use of a realistic discount rate.
- Permission for licensed investment advisory companies (ICAs) to manage TQPPs' investments.
These changes should lead to greater competition among investment fund managers, including wider choice, and should ultimately result in lower pension costs. It is also expected that pension insurance companies will introduce new products.
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