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iDeCo, short for individual Defined Contribution pension (個人型確定拠出年金), is a highly tax-efficient investment account. Contributions of the same amount are invested monthly, and cannot be withdrawn until you are 60 years old.

The principal benefits of iDeCo are:

  1. No income tax on monthly contributions (i.e. they are paid from your gross income, or before tax is deducted).
    • This means iDeCo contributions lower your liability for income and residence tax.
  2. No tax on interest/dividends/capital gains.
    • Allows dividends and growth to compound tax-free for as long as possible.
  3. Withdrawals are taxed as income, but tax deductions are available.
    • Pension Tax Deduction (公的年金等控除).
    • Retirement Income Deduction (退職所得控除).

Due to these benefits, iDeCo is a good first choice for investors who are earning an income, and are going to be in Japan long term. For investors who are less sure about their future, NISA or Tsumitate NISA are more flexible tax-efficient choices, but iDeCo has the significant advantage that deposits are not subject to income tax.

iDeCo accounts can be maintained tax free until 70 years old, but no new contributions can be added after you turn 60.

iDeCo Platforms

The full list of iDeCo providers is available in Japanese on the official site🇯🇵.

There are many providers, but SBI, Monex, and Rakuten are especially useful due to their low fees, and availability of low-cost index-funds.

SBI and Monex have completely separate systems for iDeCo compared to their regular securities accounts. For iDeCo, you will log in to a different website with different account credentials. Rakuten has an option to manage the iDeCo from within the same account.

Brokers' main sites vs iDeCo platforms
SBI main site
Monex main site
Monex ideco
Rakuten main site
Rakuten iDeco
Uses the main site if you have a Rakuten Securities account, or uses JS&T (same as Monex) if you only have an iDeCo account).

Because of this, there is little benefit to picking the same iDeCo provider as an existing securities account, unless you use Rakuten. It's best to pick the provider that best satisfies your needs (cost, fund selection, etc.).

End of Year Tax Adjustment - Nenmatsu Chousei (年末調整)

Employees who

  1. Do not need to submit a tax return
  2. Pay their iDeCo contributions from their bank account (個人払込) i.e. do not have the contributions deduced from their salary (事業主払込)

must declare their iDeCo contributions on their end of year tax adjustment in order to receive a refund of the tax paid on contributions with their December salary.

Employees whose payments are deducted from their salary (事業主払込) should already have had the tax calculations applied to their salary, so do not need to declare iDeCo information on their end of year tax adjustment.

The National Pension Fund Association should send a certificate in the post (小規模企業共済等掛金払込証明書) around October/November stating the contributions made to date, and including predicted contributions until the end of the year.

To claim the refund on the tax adjustment:

On the "Salaried Employee Insurance Premium Deduction Declaration Form" (給与所得者の保険料控除申告書):

  1. Enter the amount stated on the pension association certificate in the relevant section of the form:
    • 小規模企業共済等掛金控除
      • 確定拠出年金法に規定する個人型年金加入者掛金
    • Small scale business mutual aid etc. contribution deduction.
      • Defined contribution pension individual contributions under the defined contribution pension law.
  2. Submit the original certificate (小規模企業共済等掛金払込証明書) with the tax adjustment form.
    • If your employer uses an electronic process instead of the paper form, you will probably need to attach a scan of the certificate, and still submit the original certificate to the HR department.

If you have lost the NPFA certificate, you can request a copy.

If you do not complete the tax adjustment in time, or didn't include the iDeCo information, you can submit a tax return instead.

Unfinished: Information to add / elaborate on

See Also