BY LOUISE GEORGE KITTAKA
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 publickokumin
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 equally by the working spouse and
the spouse’s company. (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.
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