More About Pensions (Nenkin)

More About Pensions (Nenkin)

There are two main types of pension programs in Japan for those of us working here. The most common is the Employee's Pension (Kosei Nenkin) which is administered by the Shakai Hoken office and which is withdrawn from your monthly pay packet and paid to the Shakai Hoken office on your behalf by your employer. The other is Kokumin Nenkin, which is intended for people such as students, farmers, professionals, and the self-employed, and which is administered by your local city hall.

Well, ok, actually, there is a third type of pension, largely restricted to government and publicly owned organizations, called the Mutual Aid pension (Kyosai Kumiai). But I don't imagine many of our readers would be in this program.

Anyway, everyone aged between 20 and 64 years old (for Kosei Nenkin) and 20 and 60 years old (for Kokumin Nenkin) is supposed to be a member of one of the pension programs. In return for making these payments for a minimum 300 months (25 years), they are eligible to receive a basic pension (Rorei Kiso Nenkin), which currently is 59% of your average annual earnings. Over the next few years, the government expects the pay-out figure to drop to around 50%. In 2003, a married couple, where one partner had paid in for 40 years, were getting an average JPY233,000 per month. Easily enough to live on providing the family home was already paid for.

There is an interesting quirk in the Nenkin pay-in system in that you do not have to pay in over 300 consecutive months, just so long as the cumulative total reaches that level. So if you leave the country then return later, you can still continue your contribution history.

For those not wanting to stay in Japan for the full 25 years, you can get a lump sum refund after you leave, called "dattai ichiji-kin shikyu seido" which must be applied for within two years of your leaving Japan. You apply at either the Shakai Hoken office or the City office, depending on which type of pension you were in. The application form is called a "dattai ichiji-kin seikyusho" which you pick up before you leave the countr,, then submit later from home by mail. Note that this refund is only available if you've paid in for a minimum 6 months, and the maximum amount paid out is up to 3 year's worth. I have covered in other articles the fact that this limit is unfair...

One catch with receiving a refund is that unless you are prepared, you will have to pay 20% income tax. Therefore, unless you like donating cash to the government, it is important that BEFORE LEAVING Japan, you visit your local tax office and assign a resident friend or trusted colleague to be your tax agent to put in the application for your refund. The actual cash is paid to your nominated overseas account.