This article focuses on the retirement and pension systems of Japanese colleges and universities which primarily rest on the traditional defined benefit (DB) design of long-term savings, and represents important research agendas but are significantly lacking for the industry of higher education institutions in Japan. Since the Japanese government introduced the defined contribution (DC) scheme as an alternative retirement savings vehicle for the workforce in 2002, the new scheme from the outset has drawn tremendous attention from both employers and employees in the country. However, concurrent with the period of historical turmoil from the economic bubbles and global financial crises, coupled with the first wave of baby-boomers retiring from the active workforce with hefty retirement packages, both the conventional DB scheme and relatively newly introduced DC plans have suffered from the financial volatility and entailed losses. The instability of the financial markets throughout the world today has caused a pervading uneasiness concerning sustainability of the ongoing systems of pension benefits.
The issue of securing post-retirement income sources is particularly important for private institutions of higher education in Japan as their investment strategies have often involved high-risk bearing trading in the derivative markets. Even the public, i.e., national and municipal, colleges and universities are not fully guarded by governmental protection against the potential danger of insolvency, due to the conventional payas- you-go design of the state pension system. For the industry of higher education in Japan, which currently employs more than 540,000 individuals, deliberate and urgent efforts must be made by individual colleges and universities in order to establish a sustainable system which provides reliable savings opportunities for the active workforce as well as a steady income for those already in retirement.