How-tos | LIFELINES

More on pensions: what to expect and when you can get it

by Louise George Kittaka

Following the Lifelines special on the Japan pension system, some more questions have come in from readers. It also turns out that there was an error in my article and in the accompanying piece by Calvin Tong on considerations for U.S. citizens. We will address those here, as well as some new queries.

There is an error the pension piece that states: “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 equally by the working spouse and the spouse’s company.”

In fact, the pension payments for dependent spouses are waived. Neither the employer not sponsoring spouse pays any extra. The other premium payers subsidize this cost. This is the main reason the kōsei nenkin system is unsustainable.

Thank you for pointing this error out. Critics of the Japanese pension say that it is set up to encourage the “salaryman” employee enrolled in Category II (kōsei nenkin) with a spouse in Category III — who doesn’t work or works only minimally — to stay under the dependent spouse earnings threshold (¥1.3 million). Currently, unless the spouse can make considerably more than the ¥1.3 million limit, it behooves families for the dependent spouse to stay under the threshold, remaining unemployed or working minimally. This is a disincentive for some married women to seek more work and arguably keeps wages for roles typically filled by married women artificially low, so they won’t go over the threshold. Finally, as the reader notes, the system will eventually be unsustainable as the population ages, and these dependent spouses draw pensions from a system into which they weren’t required to contribute.

I was happy to read that the minimum contribution for pension eligibility will probably change from 25 years to 10 years from 2017. It said that at current calculations, those paying into the public kokumin nenkin system are eligible for ¥780,100 annually upon retirement. If the eligibility changes to 10 years then will I be eligible for the ¥780,100 annually?

In principle, all residents of Japan between the ages of 20 and 60 are required to be enrolled in the Japanese pension system. The figure of ¥780,100 is based on an individual who has paid into the kokumin nenkin system for a total of 40 years. Currently, the required monthly payment is set at ¥15,590. These figures are reviewed on an annual basis, according to the Tokyo office of the Japan Pension Service.

In order to receive a pension after retirement, individuals must pay in for 25 years. In this situation, their annual entitlement would be 25 portions of the 40 years, i.e., ¥780,100 x 25 ÷ 40. If the requirements change to 10 years in 2017, then someone working for 10 years in Japan could expect a payout of one-quarter of ¥780,100 per year after retirement, since they paid in for 10 out of the 40 years.

If the new 10-year minimum is introduced in April 2017, where does this date come into effect? For those still in the system and who reach the 10-year mark after this date? Does this mean that foreign nationals who have already left the system prior to this date are subject to the old 25-year rule?

The representative at the JPS Tokyo office wants to reassure you the new rules will be applied to everyone, regardless of when you paid into the Japanese system, where you now live and whether or not you are still working. As long as the new 10-year rule goes into effect as planned, anyone who has paid into the Japanese pension system for more than 10 years will be eligible for a pension. (However, as noted in the previous article, foreign nationals who opted to get the lump-sum pension payment upon leaving Japan will not be eligible for additional pension benefits.)

Does Japan’s totalization agreement with the U.S. include people who are paying into the kokumin nenkin system? I noticed in a previous column that Mr. Tong mentioned kokumin nenkin might not be covered — that is, these payments might not count toward U.S. Social Security credits.

U.S. taxation expert Calvin Tong provided this answer: “The correct answer should be, yes, it can be used. Thank you to the reader for bringing this up. If you are short of the minimum 40-quarter credits needed to qualify for Social Security per Social Security Administration rules, the kokumin nenkin contribution years can be added to help get you over the threshold.

“The English terminology used in both the U.S.-Japan Totalization Agreement and Social Security Administration website in referencing the qualified Japanese schemes are a bit ambiguous. If you can read Japanese, that version of the agreement is much clearer than in the English version. Here are the relevant links: bit.ly/jpsocseceng and bit.ly/jpsocsec.”

What I would like to know is how to go about having a pension transferred to one’s home country as part of the totalization agreement between the U.S. and Japan.

Again, from Calvin Tong: “If that person is living in the U.S. and contributed to U.S. Social Security, these links should provide guidance: bit.ly/jpustotalize and bit.ly/jpusbenefits.

“For a U.S. person living in Japan, you can initially go to your local JPS office. That office may or may not have staff that understands the procedures. If not, they will likely refer you to a larger office nearby. They will have you complete the appropriate forms, from which they will communicate with the Social Security Administration to verify contributions made into that system. They will then convey if you indeed have met the vesting threshold of the Japan pension.”

Finally, I also consulted with Kaoru Matsuda, a lawyer specializing in social insurance at Matsuda International Social Insurance & Labor Consulting. As such, she frequently helps foreign nationals to sort out their eligibility for Japanese pensions.

“Once someone has departed Japan, it can be cumbersome to navigate the process,” she says. “You need to be proactive about claiming your pension. To this end, having the help of a Japan-based lawyer may be useful.”

For those leaving Japan, Matsuda recommends getting your pension paperwork in order before departure.

“Various things can happen: People inadvertently end up with two pension booklets (nenkin techō), or their name may have been inputted into the system with two different katakana renderings — essentially turning them into two people in the eyes of the system,” she explains. “Some people have been enrolled in more than one category of the pension system, depending on their circumstances. Visiting your pension office and getting everything current can save time and energy down the line when to comes to retirement.”

Lifelines will be taking a much-needed break from pension-related queries for the time being. Readers with questions are advised to seek assistance at their local pension office.

Kaoru Matsuda can be contacted by email at kmatsuda@mis-co.jp. 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 to lifelines@japantimes.co.jp.