EY Japan Launches Pension Consulting Service for New Employment Models

To address the rapidly evolving employment landscape in Japan, EY Strategy and Consulting Co., Ltd. (EYSC) has introduced a comprehensive Pension Consulting Service, effective from July 1, 2025. This initiative aims to assist companies in designing and managing pension and retirement benefit systems that align with modern employment models, moving away from the traditional paradigm of lifetime employment and new graduate hiring.

Background and Challenges

In recent years, Japan’s employment culture has undergone a significant transformation, leading to the decline of practices such as mass hiring of new graduates and lifetime employment. Many existing pension schemes are based on outdated models that no longer reflect the current realities, particularly the assumption of a 60-year retirement age. With labor shortages and changes in regulations, it has become common for employees to work beyond this age, creating a disconnection between theoretical frameworks and the practical workforce.

Offered Services

EYSC’s Pension Consulting Service encompasses a wide range of offerings to ensure that pension and retirement benefit systems are effectively tailored to meet the needs of contemporary organizations. Below are the key components of the service:

1. Introduction and Revision of Retirement Benefit Systems

EYSC provides support in evaluating existing retirement benefit systems in relation to the client's competitive advantages and human resources strategies. Whether establishing a new system or revising an existing one, EYSC ensures a smooth transition from implementation to operation, including expert tax advice from EY Tax Co. when necessary.
- Design of Retirement Benefit Systems
- Revisions to Retirement Allowance and Pension Schemes
- Tax Matters Related to Employee Benefits
- Support for New System Implementation:
- Assist with labor negotiations
- Help draft retirement allowance regulations
- Post-Implementation Support:
- Improve financial wellness initiatives
- Review performance of defined contribution pension products

2. Addressing Pension Issues in Cross-Border M&A

M&A activities are a key growth strategy for many companies, but they often encounter challenges related to employee pension obligations. EYSC collaborates with its M&A advisory team to provide seamless assistance throughout the entire process, both domestically and internationally. This includes:
- Cross-Border Pension Due Diligence: Evaluating pension liabilities and negotiation of target pricing
- Support for System Transition Up to Pre-Closing
- Assistance with Transition Service Agreements (TSA) Dissolution
- Price Adjustments Related to Pensions
- Pension Buyouts
- Post-Merger Integration

3. Management of Domestic and International Pension Liabilities

Defined benefit pension systems can pose significant financial risks for companies. EYSC assists firms in managing these risks by analyzing global pension liabilities and facilitating the transition to a more suitable pension system as necessary. Strategies may include:
- Settlement of Domestic Defined Benefit Pension Schemes
- Transition to Defined Contribution Plans
- Alternative Scheme Design and Transition Support

Expert Insights

Nobutaro Kitano, a leader in EYSC’s People Consulting division, emphasizes the need to challenge traditional assumptions in the pension space. He poses critical questions about the sustainability and effectiveness of long-standing beliefs such as risk allocation in pension asset management and the evaluation of pension liabilities during M&A processes. The evolving business environment demands an updated approach to employee compensation and retirement benefits that aligns with modern employment strategies rather than an outdated mindset.

Conclusion

EY Japan's Pension Consulting Service aims to help companies navigate the complexities of the new employment landscape while ensuring that their pension and retirement systems remain competitive and aligned with contemporary workforce needs. For more information, please visit EY Japan's Pension Consulting.