Life after work in Japan: tackling readers' pension questions

Among the questions that Japan Times readers send to the Lifelines column, a perennial topic is navigating the Japanese pension system. In this special expanded column we’ll address some of the queries that have come in over the past few months.

I read that the Japanese government is thinking of reducing the requirement for pension qualification from 25 years to 10. When will the change take place?

As the reader notes, to be eligible for a pension in Japan, you need to have paid in for a minimum of 25 years. However, according to the Japan Pension Service’s Tokyo office, the minimum will decrease to 10 years from April 2017. This will be no doubt be very welcome news for many foreign nationals.

I know there is a lump-sum withdrawal option for foreigners. How does it work exactly? Will it change when the minimum eligibility period changes from 25 to 10 years?

Foreign nationals who have paid into the Japanese pension system for a minimum of six months may claim back their payments — up to a maximum of 36 months’ worth — as a one-off lump-sum payment (ichikin) upon leaving the country. The application forms and a detailed explanation of the process are on the Japan Pension Service’s website in several languages.

Note that you can only apply after leaving Japan, and that you must no longer be paying into the national pension system at that point. Before departing Japan, visit the city or town office where are you are registered and inform them of your intent to leave, along with your new address overseas. Make sure you keep your Japanese pension booklet (nenkin techō) safe, as you will need to supply information it contains to claim your lump-sum payment. Important: You must apply within two years of leaving Japan!

One more thing to bear in mind is that Japan has concluded social security agreements with a number of countries. Most of these are “totalization agreements,” whereby pension payments made in Japan can be counted toward qualification for pensions in other countries (and vice versa). However, even if your country has such an agreement with Japan, you will not to be eligible to receive any benefits at all under the Japanese pension system if you have already applied for the lump-sum payment option.

Currently, the following countries have totalization agreements with Japan. Check the Japan Pension Service’s website for specifics of each agreement: Australia, Belgium, Brazil, Canada, the Czech Republic, France, Germany, Hungary, Ireland, the Netherlands, Spain, Switzerland and the United States. India and Luxembourg have signed agreements but they are yet to go into effect. A number of other countries are in the process of signing agreements, so this list is likely to grow in the future. Agreements with Italy, South Korea and the United Kingdom cover “elimination of dual coverage” only, not totalization.

I have been enrolled in the pension system in this country under a number of categories: I was my husband’s dependent, and then when I began earning more than the spousal limit, I switched to the public kokumin nenkin plan. After that I switched to full-time employment and was enrolled in kōsei nenkin. I was also enrolled in my home country of Canada’s pension system for several years. If everything is added up, it amounts to about 25 years. How can I find out if I can get the Japanese pension after retirement, and how much I am entitled to?

This reader’s query provides a good introduction to the main pension categories. In principle, all people living in Japan aged between 20 and 59 are required to be enrolled in a pension plan, although there are deferral systems for students or young people on low incomes, as was explained in a Lifelines article earlier this year.

The self-employed, business owners or part-timers who don’t qualify through their employer enroll under the public kokumin nenkin system (also known as Category 1). Those in full-time salaried positions are usually enrolled in the kōsei nenkin system (Category II) through their employers. Dependent spouses of salaried workers enrolled in kōsei nenkin and whose annual income is under ¥1.3 million may enroll as “dependent spouses of Category II insured persons” (Category III). In this case, their pension payments are borne by the system and are subsidized by all those paying in — a nice break. (However, there is no such break for dependent spouses of Category I enrollees —they must enroll in kokumin nenkin and pay their own way.)

All changes in pension payment status should be noted in the reader’s pension booklet. She should take this to her local pension office and ask them to do a simulation of expected retirement income based on her payment history. The good news is that if the period of required payment changes from 25 years to 10 years, she will qualify easily for a Japanese pension. With regards to her overseas pension, she should consult with the Canadian pension services or her embassy about the terms of the totalization agreement, or check the Japan Pension Service’s website for more details.

I’ve been in Japan since 1970, have permanent residence and receive kokumin nenkin payments based on the fixed rates that I paid into for the required period. What I would like to have done was pay more into the system when I had a much higher income over an extended period (as with kōsei nenkin), so that my final pension might have been higher, but I couldn’t find out any information about this. Was such an option available?

This reader raises a good point about disparities between kokumin nenkin and kōsei nenkin. Kokumin nenkin is paid at a fixed rate for everyone regardless of income. Currently, those enrolled in kokumin nenkin are required to make monthly payments of ¥15,590. At this rate, it will yield an annual pension of ¥780,100 after retirement.

In comparison, kōsei nenkin payments rise with salary, and the more you pay in while you are working, the more you can get when you retire. (Note that this doesn’t apply to dependent spouses enrolled in Category III. Their payments are fixed at the same rate as others enrolled in the kokumin nenkin system.)

Although it is a bit late for the reader, there is a way for those on the kokumin nenkin system to make voluntary extra payments that will enhance their pension income upon retirement. The system is known as Kokumin Nenkin Kikin (or Japan National Pension Fund, JNPA). The aim of the fund is to reduce disparities between the two main systems — the same issue the reader is concerned about. Official information in English about the JNPA appears to be nonexistent, but their Japanese website can be found at the end of this article.

Do Japanese pension benefits rise if you retire later and choose to defer benefits? Do they fall if you have other income, e.g., from part-time work?

Let’s deal first with how age affects pension income: The Japan Pension Service’s Tokyo office explains that, in principle, payment of the old-age pension starts when an individual turns 65. However, you can apply defer it up to age 70, under a process known as nenkin kuriage seikyū. Alternatively, you can choose to apply to get pension payments from as young as 60 (nenkin kurisage seikyū). Your local pension office will have more information. If you defer payment, your monthly payments will be slightly higher once you do start drawing the pension — And vice versa, if you apply to get it before turning 65.

Many elderly Japanese are ready and able to work well into their silver years. These days, it isn’t unusual for those drawing the old-age pension to have some kind of part-time job. As long as they work less than six hours a day and less than 20 days a month, this income does not affect their pension income.

Companies who employee seniors are generally well aware of the limits, and apply them accordingly so that it won’t affect pensions. There is one more caveat for actively employed pensioners: Those aged between 65 and 69 who go over the limits mentioned above must continue to make pension payments. This rule ends after their 70th birthday.

Are Japanese pension payments treated as taxable income here? Do retirees have to furnish a tax return?

Pension income is subject to tax over a certain amount. From age 60, tax is applied for annual incomes over ¥1.080 million per year. From 65, the figure rises to ¥1.58 million annually. (Note that these figures are for individuals. Even in the case of a married couple, each partner’s income is treated separately.)

The tax on pension incomes is essentially calculated the same way as other income tax. According to the Japan Pension Service’s Tokyo office, retirees don’t have to furnish a tax return if the pension is their sole source of income, or if they are working less than six hours a day and less than 20 days a month. If they have income from other sources, such as rent, then they must complete a tax return (kakutei shinkoku). If in doubt, consult with the tax section at your local municipal office.

Can you recommend a good resource for getting information about the pension system — preferably in English? During my years in Japan, I have heard so much conflicting information from various sources.

Lifelines feels the reader’s pain. In researching this article, clear-cut answers were not always readily available. At the time of writing, the Japan Pension Service’s Tokyo office has been unable to furnish answers for several rather complicated pension-related questions from Japan Times readers, even when all communication has been conducted in Japanese. The website of the Japan Pension Service contains basic information in a number of languages, but takes some sifting through to get answers — and even then, obviously not every scenario is covered.

According to Noboru Sakata of the Tokyo office’s PR department, the best thing is to go in person and talk to the people at your local pension office. If language is an issue, taking along a Japanese-speaking friend, relative or colleague is probably your safest option.

Updated on Dec. 22 in line with correction explained in the article here.
Complications for U.S. citizens: read here.
Japan Pension Service (English): www.nenkin.go.jp/international/english/index.html.
In Japanese: www.nenkin.go.jp/section/tel/index.html.
Japan National Pension Fund (Japanese): www.npfa.or.jp/state/address.html.
Kiwi Louise George Kittaka has been based in Japan since she was 20. In the ensuing years she has survived PTA duty for three kids in the Japanese education system and singing live on national TV, among other things. Send all your comments and questions to lifelines@japantimes.co.jp