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Understanding the Japanese Pension System Part 2/3: What Will I Pay?

Whether you work in Japan for a limited or extended period of time, here’s a breakdown of the amount you will contribute to the pension plan and what you can expect to get out of it.

By 6 min read

Calculating the amount you pay into the Japanese pension scheme while working in Japan — and what you will be entitled to receive — can be tricky, but not impossible.

In part two of our “Understanding the Japanese Pension System” guide, we will cut through all the jargon and intimidating math to clearly show how the pension plan will affect you and your monthly take home pay.

Pension contribution amounts

People who come from overseas to live and work in Japan follow all sorts of career paths. Some see them working for just a couple years or more, others see them leaving and returning while still others see people settling in the country to make their homes and raise families.

Due to the vagaries of employment and its incumbent social insurance benefits, it can be hard to separate the wheat from the chaff, so to speak, and figure out exactly how much you should be paying into the Japanese pension system.

We’ve managed to break it down into four example situations — one of which should apply to almost anyone working here — followed by some easy-to-understand explanations of how the sums are worked out where applicable.

Example 1: If you contribute to the national pension plan for less than three years.

A person who is self-employed, works part-time or full-time at a company that is not insurance applicable with less than five employees and only pays into the kokumin nenkin (国民年金), or national pension, as explained in part one of this series.

You will pay…
¥16,340 per month toward your pension, like everybody else who pays into the national pension.

You can receive…
A lump sum payment of everything you paid into the system for the past three years (you cannot reclaim any payments totaling more than three years) or have credit for your pension contributions paid in Japan added to the record of the national pension in your home country if that country has an agreement with Japan (list of the 18 eligible nations here).

… there are certainly some things you may want to consider regarding the payout of  your pension contributions.

Example 2: If you contribute to the employee pension plan for less than three years.

A person who lives in Japan for three years earning ¥300,000 a month on a full-time contract with a company that enrolls its employees into the kosei nenkin (厚生年金), or employee’s pension insurance plan, and matches their contributions, as explained in part one of this series.

You will pay…
¥27,450 per month toward your pension.

You can receive…
A lump sum payment of up to ¥990,000 after notifying the pension bureau that you are leaving Japan or have the credit for your Japanese pension contributions added to the national pension system in your home country if that country has an agreement with Japan (list of the 18 eligible nations here).

How we got these numbers:
A person in this situation is paying 9.15 percent of their salary towards their pension each month that equals a  ¥27,450 deduction from their monthly pay.

The lump sum is payment option is equal to one month’s salary plus an extra 10 percent for each year you live in Japan. You can work that out by taking your income and multiplying it by 1.1 if leaving after one year, multiplying it by 2.2 if after two years or multiplying it by 3.3 if after three years.

Example 3: If you contribute to either pension plan for more than three years but less than nine years.

People who live in Japan between three and nine years are entitled to everything noted in the two examples above.

The lump-sum payment option only applies to your last three years of contributions. To get access to any payments you made more than three years ago, you will need to apply to have those credits for pension contributions transferred to your home country’s pension system if that country has an agreement with Japan (list of the 18 eligible nations here).

Example 4: If you contribute to either pension plan for more than 10 years.

A resident who lives in Japan for 10 years or more, earning ¥300,000 a month and working full-time will pay the same amounts as above but cannot get the lump-sum payout when they leave Japan. The only way to recoup your payments is to transfer credit of your Japanese pension plan contributions to your home country’s system if that country has an agreement with Japan (list of the 18 eligible nations here) or wait until you reach retirement age as Japanese pensions can be received worldwide.

Some things to consider

The pension system in Japan is a difficult world to navigate. Hopefully, this section of our simplified guide has made the amounts you will contribute and what you can expect to receive a little clearer. Note, though, that numbers change slightly every year and there are always new laws about pensions being discussed. This guide was based on the current information available at the time of writing.

We definitely recommend finding out if your company has enrolled you in the  employee’s pension insurance plan rather than the national pension scheme. A private Japanese business with more than five employees is legally required to this. Many companies still refuse to follow this law and enroll their employees in the kokumin nenkin hoken. Unfortunately, there is not much an employee can do to force an employer to follow the law short of joining a union and mounting a legal challenge.

If you plan to leave Japan after working here for a short time, there are certainly some things you may want to consider regarding the payout of  your pension contributions — such as taking advantage of the lump-sum payment option or having your contributions to the Japanese pension scheme credited to that of your home country, if applicable — we explain that in the third and final part of this series.

The future is now

Hopefully, you feel better about your future after reading this. Just remember that whatever you’re paying into the pension system now is an investment for the future. Whether that future is three years away or 45, you’ll still be glad for the money when you do receive it.

In our final installment of this series on understanding the Japanese pension system, we’ll get to the good stuff: explaining exactly how to reclaim your pension. Whether you leave after only three years and want to claim the lump-sum payment, have your contributions credited to your home country’s pension plan or as a retiree still living in Japan.

If you missed the first part of our series, please see “Understanding the Japanese Pension System Part 1: What Is It and How Does It Work.” In “Understanding the Japanese Pension System Part 3” we’ll explain exactly how to collect your pension — either as a lump-sum payment when you leave Japan or when you reach retirement age.

Thanks to Ben Tanaka of the Retire Japan website for his help with this article. Retire Japan aims to help foreign residents learn about personal finance, investing and money issues that will impact their life in Japan.

Jeff W. Richards contributed to this article.

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