A Guide to Pensions for Foreign Residents in Japan
By Liam Carrigan
On April 11, 2017
It used to be the case that the vast majority of those who came to Japan did so with the intention of staying here for one or two years, gaining some experience, perhaps picking up some of the language, and then heading back home to “get a real job.” However, these days, it’s no longer so clear cut.
More and more people are choosing to stay here for several years, or as in my own case, to make this country their permanent home.
While this has the obvious benefit for the government of additional workers contributing additional tax revenue, it also creates some headaches for both the foreign residents and the bureaucracy that administers their benefits.
To say that Japan’s pension system is complicated is a bit like saying that the sun is rather warm. It is a confusing, confounding mess — unless you know where to find the information you need. Thankfully, I did the reading so you don’t have to!
So here is a breakdown of Japan’s pension system and how it applies to you.
Everyone gets one
In principle, everyone in Japan who is working and is aged between 20 and 60 should be enrolled in the national pension system. If your prospective employer offers you a full-time job and doesn’t mention pension enrolment, be very suspicious.
The exceptions to this are people who are not working and are the dependent of someone who is enrolled in the system. Additionally, some companies may also offer a private, company-subsidized pension scheme to their workers but this is in addition to, not as an alternative, to the basic national pension system.
How much does it cost?
There are four basic categories:
1) Self-employed people, students and farmers aged between 20 and 60
The expected monthly contribution starts at a rate of ¥14,660 per month, however it increases by ¥280 per month for each year you contribute, maxing out eventually at ¥16,900 after eight years of consistent contributions.
2) Private sector employees under 70
The total contribution is 15.704 percent of your gross monthly salary. However, this contribution is split 50/50 between you and your employer, so the actual deduction from your monthly salary in real terms is just under 8 percent. Note that this contribution covers the combination of your basic national pension and your company subsidized pension.
3) Public sector workers and school teachers
This is where things get a little complicated. For public sector workers and school teachers, the pension contribution is again split 50/50 between employee and employer. However, instead of paying into a private company pension fund, as in point #2, a portion of this contribution goes into a mutual aid pension. To the layman, this may seem the same, but they are slightly different from a legal perspective.
The contribution amount varies between 12.2 and 15.1 percent depending on which mutual aid association administers your workplace pension. Given that it is once again a 50/50 split between employee and employer, you are looking at a monthly deduction in the range of 6 to 7.5 percent.
4) Dependents and spouses of category #2 or #3 contributors
As I mentioned, dependents are exempt from making monthly contributions to the pension fund and are instead covered under their partner’s pension plan. However, this only covers the basic national pension, so the amount payable on retirement will be significantly lower than that of your spouse.
For the purpose of taxes, pension and insurance; teachers at private conversation schools such as eikaiwa are regarded as company employees, not teachers. This is also why such teachers receive a Specialist in Humanities visa instead of one as an instructor or professor. As such, they should be covered under category #2.
ALTs are in decidedly murkier waters in this regard, as despite being employed by private dispatch companies, they perform their duties in public schools. The official legal line is that they are private sector employees and as such come under category #2, though some currently dispute this. In either case, you and your employer should still be contributing in some form to the pension plan on a monthly basis.
What can I look forward to in retirement?
A final question I guess you want to ask is, how much will I get back when I retire?
The contribution amounts vary a great deal depending on your own circumstances. As such, I can’t really give a cast iron guarantee of the amount you will receive.
What I can do, however, is provide you with a couple of examples as to the probable amounts you will receive. Please note that these figures come from a few years ago, but are unlikely to have changed much in that time, given the lack of inflation in the Japanese economy.
Let’s look at a self-employed person, in category #1, contributing to the basic national pension for 40 years. On reaching 60, their monthly payout would be ¥66,000 per month.
Doesn’t sound like much, I know, but remember that this is only based on the basic national pension.
As another example, let’s look at the case of a husband and wife, one of them is a category #2 contributor the other is a category #4 dependent.
Based on 40 years of contributions, their combined pension comes in at ¥232,000 per month.
Sounds a bit healthier, doesn’t it?
The guide I have put together is based on the most up-to-date resources I could find and also some off-the-record conversations with government pension department employees. With Japan’s ongoing demographic problems, the pension and health insurance systems have, in recent years, been in an almost constant state of flux.
If you really aren’t sure about your pension and insurance contributions, I would strongly advise you to head down to your local city ward office and get the latest advice straight from the source. Many ward offices have pre-determined times each month when foreign language support is available. Even if you have a fairly good command of Japanese, I would recommend taking advantage of this service if you can.
What do you think of Japan’s pension system? How does it compare to the system in your home country? Leave your thoughts in the comments below and let’s discuss!