Japanese pension system
Japan has a multi-tiered pension system consisting of a number of public and private pension schemes. Enrollment in one of the two main public-pension schemes is compulsory for all registered residents over the age of 20, with contributions mandatory through at least the age of 59 (exemptions and deferments are described below). Benefits are received at age 65 in principle, though these can be taken at a reduced rate from 60 or at an increased rate after 65.
At any point in time, an individual will normally be covered by one of two public-pension schemes:
- Basic Pension. Typically referred to as Kokumin Nenkin 国民年金, or National Pension. (The official name is 老齢基礎年金, or Old-Age Basic Pension.)
- Employees' Pension Insurance. Kousei Nenkin Hoken 厚生年金保険. (The name is usually shortened to Kousei Nenkin.) This scheme incorporates the equivalent of the Basic Pension, eliminating the need for separate Basic Pension contributions.
A minimum period of 10 years of contributions, exemptions or deferments is ordinarily required to receive benefits. This qualification period includes both the Basic Pension and Employees’ Pension Insurance; you ordinarily need 10+ years in total, and these years can be a combination of the two schemes.
The Japanese pension system is usually described as a three-tiered system. The first two tiers are public pensions (kouteki nenkin 公的年金); the third tier includes a number of privately financed pension schemes (shiteki nenkin 私的年金). The iDeCo pension, introduced in 2001, is also technically classified as a third-tier (private) scheme, although it can be combined with other third-tier pensions and functions as a de facto second tier for Category 1 and Category 3 insured individuals. The system as a whole can be represented by the following diagram, which conforms closely to the one provided by the Ministry of Health, Labour and Welfare but has been created from scratch:
Basic Pension: Kokumin Nenkin
Kokumin Nenkin (国民年金, 老齢基礎年金) is the base pension system. All registered residents of Japan aged 20 to 59 years must be covered by the National Pension system.
Those registered in Kousei Nenkin (厚生年金) and their dependent spouses will automatically have their contributions covered.
Other individuals need to register for Kokumin Nenkin and pay directly. In such cases, a monthly contribution (¥16,520 from April 2023 to March 2024; subject to annual change) is to be paid by the individual.
480 months (40 years × 12 months) of contributions are required to receive the full Base State Pension of ¥795,000 per annum (as of 2023).
120 months (10 years x 12 months) of contributions, exemptions or postponements are ordinarily required to receive a pro rated pension if the full 480-month period is not met. There are some exceptions to this 10-year rule.
The quoted full pension amount is applicable to those starting to draw their pension aged 65. However, the pension needs to be claimed, and can be received at any age from 60, with the rate adjusted according to the starting age. At 60, the rate will be 76%, and at 75, the rate will be 184%.
The following are the very limited exceptions to Japan residents requiring compulsory coverage:
- Designated Activities Medical Stay (visa)or
- Designated Activities (Long Stay for Sightseeing and Recreation) (visa)
2. Individuals whose circumstances mean that a Social Security Agreement deems them liable for social insurance contributions to another country rather than Japan (this includes people seconded to Japan from relevant countries for short to medium term)
Excluded periods are different from exempted periods. Time with an exclusion does not count towards the 10-year qualifying period.
There are possible exemptions to contributions covering circumstances including low income. Note there is a special exemption for the period around childbirth, with a different application procedure, and full pension benefits rather than the reduced benefits quoted below.
An exemption, if awarded, will be granted as a full exemption, 3/4 exemption, 1/2 exemption or 1/4 exemption. Exemptions need to be requested via the Pension Office who will asses each application on its own merits.
Exempted periods qualify for pension benefits (unlike periods of exclusion), but at a reduced rate from non-exempted periods. See below for details:
|Type of exemption||Monthly contributions (2023)||Benefit calculation factor for exemptions up to March 2009||Benefit calculation factor for exemptions from April 2009|
For example, an individual granted a full exemption in 2023 will pay no contributions, and this exempted period will count for half the level of benefit of a non-exempt period.
Those who are awarded a full or partial exemption are able to retroactively make contributions for exempted periods within 10 years if they wish to qualify for the full benefit level rather than the partial benefit level associated with that exempted period.
- Pamphlets in English and other languages giving further details about exemption and postponement, including an annotated application form.
- Application form (Japanese) (PDF), with accompanying information and an example.
Special exemption for childbirth
Since April 2019, Category 1 individuals (ie those directly enrolled in Kokumin Nenkin) are eligible to apply for a special exemption from contributions for childbirth (Japanese) for a period of 4 months for single pregnancies or 6 months for multiple pregnancies.
This exempted period will start from the month before the due date or birth date (depending on whether the application is made before or after the birth) for single pregnancies, and 3 months before the due date or birth date for multiple pregnancies.
Example: due date / birth date in April.
Single pregnancy: exemption applies in March, April, May and June (4 months)
Multiple pregnancy: exemption applies in January, February, March, April, May and June (6 months)
The pension benefits for this specially exempted period will be the same as if full contributions had been made. This differs from ordinary exemptions, when benefits are calculated at a reduced rate.
- It is possible to make additional pension (fuka nenkin) contributions during this specially exempted period.
- Those who are voluntarily enrolled in Kokumin Nenkin are not eligible for this special exemption.
The following groups of people may be able to apply to a postpone their contributions:
- Students in full time education (with income below a threshold)
- Low income individuals aged 50 or below who were not granted an exemption
This protects your status in the national pension system. Should you become disabled or die, the relevant payments to yourself or next of kin would happen as normal. These postponed years count as qualifying years (towards the 10 years of contribution threshold necessary to receive a pension), but do not count for benefit purposes. Postponement is different from exemption in this respect. Individuals who have been granted a postponement will have 10 years to make the contributions if they wish to qualify for the benefits. An indexed rate of contributions will be applied if the contributions are not made within three years of the postponed period.
See Application for National Pension Contribution Exemption／Payment Postponement for further details about exemption and postponement, including an annotated application form in English.
Exemption, special exemption, postponement and exclusion: summary
|Exemption||Special exemption for childbirth||Postponement||Exclusion|
|Eligibility||Those with low income, etc.||Category 1 insured women who give birth (the period of special exemption will be 4 months for single births and 6 months for multiple births)||1. Students in full time education (with income below a threshold)
2. Low income individuals aged 50 or below who were not granted an exemption
|1. Residents with Medical Stay or Long Stay for Sightseeing statuses of residence|
2. Residents for whom a Social Security Agreement deems them liable to another country's social insurance (eg seconded workers)
|Does the period count towards qualifying years?||Yes||Yes||Yes||No|
|Does the period give pension benefits?||Yes, at a reduced rate (see table above), unless retroactive contributions are made||Yes, at the full rate (as if contributions had been made)||No, unless retroactive contributions are made||No|
|Can retroactive contributions be made?||Yes, within 10 years||No (the pension record is credited as if contributions had been made in full so there is no need to contribute retroactively)||Yes, within 10 years||No|
Three categories of people are eligible to make voluntary contributions:
- Registered residents of Japan aged 60 to 64 years
- Japanese citizens aged 20 to 64 years who reside outside of Japan
- Persons born on or before April 1, 1965, aged 65 to 69 years who have not satisfied the minimum qualification period
The first category might be relevant to foreign nationals or naturalised citizens who moved to Japan after age 20 and will therefore not have accrued 40 years of contributions by age 60.
Voluntary subscribers are eligible to contribute to the Additional Pension (fuka nenkin).
Voluntary coverage should be applied for at the municipal office of your place of residence for those resident in Japan. For those not resident in Japan, the application should be made at the Japan Pension Service office with jurisdiction over your last place of residence in Japan, or at the JPS Chiyoda Branch Office in Tokyo for applicants who have never been resident in Japan.
Additional Pension: Fuka Nenkin
Fuka nenkin (付加年金) is a small top-up to the pension available to individuals enrolled in Kokumin Nenkin. Contributions are ¥400 per month, and the benefit will be an extra ¥200 per month (per month of contributions). This equates to annual contributions of ¥4,800 and an annual benefit of ¥2,400.
Further details can be found on the Fuka nenkin page.
Employees' Pension: Kousei Nenkin
Kousei Nenkin (厚生年金), Employees' pension, is actually part of the 厚生年金保険 (Employees' Pension Insurance) which covers employee pension payments in the event of death, disability or retirement. In principle, mandatory contributions begin at the time of full-time employment, regardless of age, and continue through the age of 69 for any period during which one is a full-time employee.
Kousei Nenkin is in addition to the Kokumin Nenkin therefore contributions also contain the required contribution to the Kokumin Nenkin. Deductions on salary statements will not show how much went to each.
Employee income for calculating contributions is currently capped at ¥650,000 per month salary and up to three bonus payments a year of ¥1,500,000 each, with more than three months required between each applicable bonus payment (two bonuses a year is typical).
Any Salary or bonus payments in excess of those amounts will not form part of the calculation for Kousei Nenkin contributions.
Contributions into Kousei Nenkin are borne equally between the employee and the employer.
The calculation is 18.3% of in scope remuneration. Standard employees will see a deduction of 9.15% from salary. Monthly salary up to the ¥650,000 limit is split into 32 bands as detailed in the below table.
As an example, an employee earning ¥300,000 per month would be in Band 19. The total contribution would be ¥54,900 and the employee would see a deduction of ¥27,450 each month.
The latest tables can be navigated to on the Japan Pension Service🇯🇵 Website.
Exemptions for maternity leave and childcare leave
Individuals taking maternity leave and childcare leave are eligible to apply for exemptions from contributions, which should be done via the employer. Both the employee and employer will not make contributions during the exempted period, but the individual's pension record will be credited as if contributions had been made. Note that iDeCo contributions are permitted during these exempted periods.
Lump sum withdrawal
Individuals who are not Japanese citizens may be eligible to reclaim some of their pension contributions (Kokumin Nenkin or Kosei Nenkin) when leaving Japan. For official information and an application form, see Lump-sum Withdrawal Payments on the Japan Pension Service's website.
- Not a Japanese citizen
- Have made 6+ months of contributions
- Do not/will not have an address in Japan
- Have never been eligible to receive pension benefits
- Less than 2 years have elapsed since officially ceasing to have an address in Japan
Up to 60 months (5 years) of contributions can be partially reimbursed. It is possible to claim the lump sum withdrawal for a period of more than 60 months of contributions, but in that case the refund will be calculated on the amount for 60 months. (Prior to April 2021, the maximum number of months of contribution for calculation purposes was 36.)
The partial reimbursement under the lump sum withdrawal system will be approximately half the value of the contributions for contribution periods of up to 60 months (eg 12 months of kokumin nenkin contributions cost approximately ¥200,000, but the lump sum withdrawal amount will be approximately ¥100,000). However, contribution periods are banded together (eg 12-17 months of contributions give the same payout), so on average the gross payout will be less favourable than half. Additionally, income tax at the rate of 20.42% will be withheld on the lump sum, but can be reclaimed, which will ordinarily require a tax representative who is resident in Japan.
- All contribution records will be erased from the system, meaning if you return to Japan in the future, you will need to start from scratch
- If you go to a country with a totalisation agreement, the erased period will not count towards the other country’s pension
- It is possible to use the lump sum withdrawal system more than once if you are resident in Japan on more than one occasion and fulfil the eligibility criteria each time
- As noted above, the lump sum withdrawal will be significantly less than the sum of the contributions paid to date
- Additional pension (fuka nenkin) contributions will not be included in any lump sum calculations and cannot be reimbursed in part or full
- Japanese pensions can be drawn worldwide by eligible individuals
Exceptions to the 10-year qualification period
However, there are some scenarios in which periods without coverage between ages 20 and 59 can be counted towards this 10-year qualification threshold. The Japan Pension Service refers to these as ‘complementary periods’ in their English summaries, and colloquially these periods may be referred to as カラ期間 (‘’karakikan’’, empty periods) in Japanese. Full details are in Japanese (合算対象期間) on the Japan Pension Service site, but readers’ attention is drawn to the following cases:
- Those who have acquired Japanese nationality or permanent residency after May 1, 1961: the period of overseas residence before the acquisition of nationality or permission of permanent residency
- Japanese citizens: the period of overseas residency after April 1, 1961 (if not making voluntary contributions)
Such ‘complementary periods’ do not increase the benefit amount. If an individual qualifies for pension benefits via 8 years of contributions and 2 years of ‘complementary period’, their benefits would be based upon 8 years of contributions.
Prior to August 2017, the qualification period to receive a pension was 25 years. 'Complementary periods' could have been key to many foreign residents qualifying for a pension under the old rules. With the reduction in qualification period to 10 years, 'complementary periods' may have become less critical to many foreign residents, though could still provide some with the lifeline to being able to vest from their contributions.
From April 2023, those with 480 months of kokumin nenkin coverage will receive ¥795,000 per year in pension benefits.
The amount will be pro rata for individuals with fewer qualifying months, and adjustments will also be made for any periods of exemption, postponement, etc.
Also, it is possible to claim the pension at any time from 60 years of age. If drawing before 65, the pension will be at a reduced rate, and if drawing after 65, the pension will be at an enhanced rate. At 60, the rate will be 76% and at 75 the rate will be 184%. The rate will not increase beyond 184% even if the pension is further deferred.
Taxation of pension annuities
Annuities received during retirement from Kokumin Nenkin and Kousei Nenkin are subject to taxation by both national and residence taxes. Annuities count as Miscellaneous Income (Public Pensions etc.) (雑所得 公的年金等) and are taxed with the aggregate taxation (総合課税) method. There are various deductions, however, which allow for a base level of tax-free income before progressive taxation through the different personal income tax bands.
The basic deduction (基礎控除) is ¥480,000 for national tax, and ¥430,000 for residence tax. This is available to everyone with a total income of less than ¥24,000,000 in the tax year .
There is also a special Pension Tax Deduction (公的年金等控除) . This starts at ¥600,000 for those under 65, and ¥1,100,000 for those over 65, if total yearly income is less than ¥10,000,000. The Pension Tax Deduction increases in bands with the total value of all qualifying pensions. Qualifying pensions include Kokumin Nenkin, Kousei Nenkin, Japanese company DC and DB pensions, and some foreign state pensions.
Thus, over 65s can receive ~¥1,500,000 from pension annuities tax-free in retirement, even before considering other possible deductions, such as spousal, dependents, life and earthquake insurance, and medical expenses deductions.
Survivors' benefits for public pensions
Both of the public pensions provide for survivors' benefits. The Survivors' Basic Pension (izoku kiso nenkin 遺族基礎年金) applies when dependent or disabled children are involved. The Survivors' Employees' Pension (izoku kousei nenkin 遺族厚生年金) is part of the Employees' Pension Insurance scheme and applies to dependent spouses, dependent children, and certain other dependent relatives of private-sector employees and members of mutual-aid associations (kyousai kumiai 共済組合). Depending on eligibility, survivors may claim benefits under either or both of these pensions. Public-pension survivors' benefits are exempt from taxation.
For both pensions, it is important to note that, except when the deceased was still making contributions, survivors' benefits are available only in the case of a deceased individual with 25 years of valid coverage, and that eligibility to receive benefits ends with remarriage in the case of the spouse and with marriage or the attainment of adulthood in the case of children (up to March 31 of the fiscal year in which the child turns 18 or, if disabled, up to the age of 20). Furthermore, eligibility to receive benefits is limited to those financially dependent upon the deceased at the time of death, although financial dependency (生計維持 seikei iji) for the purpose of the pension law is defined as 1) sharing a livelihood, and 2) having a gross income of less than 8.5 million yen or a net income of 6.55 million yen. It is a substantially more generous standard than the one used for determining eligibility for social insurance, and it is comparatively easy to meet.
The explanations provided here are fairly comprehensive, but it is not possible to include every relevant detail, and some information is time-dependent. Complete documentation in Japanese regarding survivors' benefits can be downloaded from the Japan Pension Service.
Concise explanations in English regarding pension benefits generally and how to claim them are provided online by the Japan Pension Service for the Basic Pension and the Employees' Pension. The Promotion and Mutual Aid Corporation for Private Schools of Japan (PMAC; usually referred to as Shigaku Kyousai 私学共済) also offers concise English explanations of the Survivor's Basic Pension and the Survivors' Employees' Pension.
Ultimately, the most reliable source of information is your local pension office (or mutual-aid association). Always consult them regarding your own specific case.
Survivors' Basic Pension
Eligibility and conditions
Those eligible to receive a Survivors' Basic Pension are 1) the surviving spouse of an individual enrolled in the National Pension scheme, as long as the surviving spouse is responsible for the financial support of children of the deceased; and 2) a dependent child or dependent children of an individual enrolled in the National Pension scheme. Note that the word "child" is defined as an unmarried child up to March 31 of the fiscal year in which the child turns 18 (or up to the age of 20 for a child with a Grade 1 or Grade 2 disability). Unborn children of the deceased are also eligible for benefits from the time of birth. Children are not eligible to receive survivors' benefits independently as long as the spouse of the deceased is receiving a Survivor's Basic Pension or for any period during which the children are the financial dependents of a parent.
One of four conditions must be met for the Survivors' Basic Pension to be payable:
- The deceased was enrolled in (i.e., was contributing to) the Basic (National) Pension scheme.
- The deceased was between the ages of 60 and 64, was enrolled in the Basic Pension scheme, and was a resident of Japan.
- The deceased had been determined eligible to receive a Basic Pension. (This applies to those who had actually submitted a claim to take their pension, including those who had declared their intention to defer it.)
- The deceased had satisfied the necessary conditions to receive a Basic Pension.
- With regard to conditions 1 and 2, which include cases in which the deceased had not necessarily contributed to the pension for the required 25 years, the deceased must have actually contributed to the scheme -- by the day preceding the day of death -- for at least two-thirds of the eligible period of coverage, including periods during which the deceased was exempted from making payments. However, up to March 31, 2026, it is considered sufficient for a deceased individual under the age of 65 not to have been delinquent -- by the day preceding the day of death -- in making the required pension payments for the year immediately preceding the month before the month of the deceased's death (in other words, if death occurs in June, the deceased cannot have been delinquent in making pension payments at any time between May of the previous year and April of the year of death).
- With regard to conditions 3 and 4, the deceased must have accumulated a combined total of 25 years of actual contributions, periods of exempted coverage, and aggregated periods of deemed coverage (gassan taishou kikan 合算対象期間 / kara kikan カラ期間).
A surviving spouse with dependent children receives an annual pension of ¥780,900, with an additional annual benefit of ¥224,700 for each of the first and second surviving children, and a further ¥74,900 annually for each surviving child beyond that. (These amounts are for fiscal year 2021.)
Surviving children dependent upon the deceased at the time of death receive an annual pension of ¥780,900, with an additional annual benefit of ¥224,700 for the second surviving child, and a further ¥74,900 annually for each surviving child beyond that. The children are expected to divide the total amount of pension benefits equally among themselves.
Benefits continue until the end of the fiscal year (March 31) in which last unmarried dependent child reaches the age of 18 (or up to the age of 20 for those with Grade 1 or Grade 2 disabilities). The surviving spouse loses the eligibility to receive benefits upon remarriage; surviving children lose the eligibility to receive benefits upon marriage.
A Widow's Pension (kafu nenkin 寡婦年金) is payable between the ages of 60 and 64 to the dependent surviving wife of a Category 1 insured person who, as of the day preceding the day of death, had an eligible coverage period of 10 years or more. Furthermore, the couple must have been married for a continuous period of at least 10 years (including common-law marriages; the required minimum period is 25 years for deaths that occurred prior to August 1, 2017). Benefits amount to three-fourths of the Basic Pension benefits to which the deceased was entitled. This pension may not be claimed if the deceased had ever received regular Basic Pension benefits himself or was determined to be eligible for a Basic Disability Pension, or if the surviving wife had claimed her own Basic Pension before the age of 65. If the surviving wife is eligible for both the Widow's Pension and the lump-sum death benefit (see below), she must choose to receive one or the other.
A lump-sum death benefit (shibou ichijikin 死亡一時金) is payable to dependent survivors of a Category 1 insured person who, as of the day preceding the day of death, had actually contributed to the National Pension for a minimum of 36 months (with certain qualifications). The amount of the benefit varies from ¥120,000 to ¥320,000 depending on the contribution period, with an additional ¥8,500 payable if the deceased had, by the day preceding the day of death, paid supplementary pension premiums for at least 36 months. This benefit may not be claimed if the deceased was receiving either Basic Pension benefits or Basic Disability Pension benefits, or if any surviving relative is eligible to receive a Survivors' Basic Pension. The benefit must be claimed within a period two years beginning on the day after the deceased's death.
Survivors' Employees' Pension
Eligibility and conditions
As mentioned above, this pension is available only to dependent spouses, dependent children, and certain other dependent relatives of a deceased individual covered by the Employees' Pension Insurance scheme. One of five conditions must be met for Survivors' Employees' Pension benefits to be payable:
- The deceased was enrolled in (i.e., contributing to) the Employees' Pension Insurance scheme.
- The deceased died of an illness or injury within five years of having first been diagnosed with that illness or injury while enrolled in the Employees' Pension Insurance scheme.
- The deceased was receiving a Grade 1 or Grade 2 Employees' Disability Pension.
- The deceased had been determined eligible to receive an Old-Age Employees' Pension (rourei kousei nenkin 老齢厚生年金). (This is the earnings-related portion of the Employees' Pension, which consists of both a fixed-amount portion and an earnings-related portion, the former being the equivalent of the Basic Pension.)
- The deceased had satisfied the necessary conditions to receive an Old-Age Employees' Pension.
- With regard to conditions 1 and 2, which include cases in which the deceased had not necessarily contributed to the pension for the required 25 years, the deceased must have actually made contributions -- by the day before the day of death -- for at least two-thirds of the total eligible period of coverage under the National Pension scheme, the Employees' Pension Insurance scheme, and the relevant mutual-aid association scheme, including periods during which the deceased had been exempted from making payments. However, up to March 31, 2026, it is considered sufficient for a deceased individual under the age of 65 not to have been delinquent -- by the day before the day of death -- in making the required pension payments for the year immediately preceding the month before the month of the deceased's death (in other words, if death occurs in June, the deceased cannot have been delinquent in making pension payments at any time between May of the previous year and April of the year of death).
- With regard to conditions 4 and 5, the deceased must have accumulated a combined total of 25 years of actual contributions, periods of exempted coverage, and aggregated periods of deemed coverage (gassan taishou kikan 合算対象期間 / kara kikan カラ期間).
- Members of mutual-aid associations will either receive consolidated payments from the Japan Pension Service or the relevant mutual-aid association (conditions 1, 2, and 3) or they will receive separate payments from both the Japan Pension Service and the relevant mutual-aid association (conditions 4 and 5).
According to the official Japanese Pension Service guide, seven categories of dependent survivors are eligible to receive pension benefits, in the following order of precedence:
- A surviving wife of any age with dependent children, or a surviving husband over the age of 55 at the time of the deceased's death with dependent children. For a surviving husband over the age of 55, the pension is payable from the age of 60, except in cases where the husband is already receiving a Survivor's Basic Pension.
- An unmarried surviving child who, at the time of the deceased's death, has not yet reached the end of the fiscal year (i.e., March 31) in which the child turns 18, or up to the age of 20 for children with a Class 1 or Class 2 disability. Children of a surviving spouse receiving a Survivors' Employees' Pension are excluded from eligibility. Unborn children of the deceased are also eligible for benefits from the time of birth.
- A surviving wife of any age without dependent children. However, if the surviving wife is below the age of 30, benefits are limited to a period of five years.
- A surviving husband over the age of 55 at the time of the deceased's death without dependent children. The pension is payable from the age of 60, except in cases where the husband is already receiving a Survivor's Basic Pension.
- A surviving parent over the age of 55 at the time of the deceased's death. The pension is payable from the age of 60.
- An unmarried surviving grandchild who, at the time of the deceased's death, has not yet reached the end of the fiscal year (i.e., March 31) in which the grandchild turns 18, or up to the age of 20 for grandchildren with a Class 1 or Class 2 disability.
- A surviving grandparent over the age of 55 at the time of the deceased's death. The pension is payable from the age of 60.
In general, Survivors' Employees' Pension benefits consist of a fixed proportion (3/4) of the earnings-related portion of the Employees' Pension benefits that the deceased started receiving, or would normally have started receiving, at the age of 65. In this respect, it is important to remember that the fixed-amount portion of the deceased's Employees' Pension (the equivalent of the Basic Pension) is not included when calculating survivors' benefits, and that any increased amounts received by the deceased as a result of delaying the pension, for example, are also excluded from benefit calculations. This means that benefits are likely to be about half, or possibly less, of the total pension a deceased individual over the age of 65 was actually receiving or eligible to receive.
The earnings-related portion of the Employees' Pension is determined first by adding two separate amounts: 1) the deceased's Average Standard Monthly Remuneration (heikin hyoujun houshuu getsugaku 平均標準報酬月額), multiplied by a specified fraction (7.125/1000), multiplied by the number of covered months up to March 2003; 2) the deceased's Average Standard Remuneration (heikin hyoujun houshuugaku 平均標準報酬額; this includes bonuses apportioned over the year), multiplied by a specified fraction (5.481/1000), multiplied by the number of covered months beginning in April 2003. This sum is then multiplied by 3/4 to arrive at the amount of benefits payable to the deceased's survivors.
- In cases where the previously mentioned conditions 1, 2, or 3 apply and coverage has not reached a total of 300 months, 300 months (25 years) is used as the applicable figure for calculating benefits.
- Further qualifications apply when the spouse is over the age of 65, although they are intended to provide survivors with the highest level of benefits possible (see the relevant Japan Pension Service page (Japanese) for details).
- Finally, surviving spouses who become eligible to receive their own Employees' Pension benefits at the age of 65 will have their Survivors' Employees' Pension benefits reduced by the same amount.
A separate annual Widow's Supplement for the Middle-aged and Elderly (chuu-kourei kafu kasan 中高齢寡婦加算) of ¥585,700 is payable if the widow is between the ages of 40 and 64 and is not part of a household with dependent children at the time of her husband's death, or if she has become ineligible to receive a Survivors' Basic Pension as a result of her children losing their eligibility for survivors' benefits upon reaching the age of 18 (or the age of 20 for those with disabilities). Men are not eligible for a similar benefit.
As a transitional measure put into place to benefit 1) unemployed housewives for whom enrollment in the National Pension was optional before April 1986, and 2) widows born before April 1986 who up to the age of 64 had been receiving the Widow's Supplement for the Middle-aged and Elderly, a Transitional Widow's Supplement (keikateki kafu kasan 経過的寡婦加算) is payable to surviving wives born on or before April 1, 1956. The amount of this benefit ranges from ¥19,547 to ¥585,700 annually, depending on date of birth (2021 figures; see the table on this Zenrou Keizai Kyoukai page (Japanese) for the precise amounts; the table is about halfway down the page).
Employees' Pension and employment after 60
An individual who continues to be employed after reaching the age of 60 remains responsible for mandatory contributions to the Employees' Pension scheme but may also be eligible to receive pension benefits, a dual status reflected in the term Zaishoku Rourei Nenkin (在職老齢年金, or Old-Age Pension for the Employed). Due to this dual status, rules come into play that, depending on earnings, will result in the suspension of a portion of the pension benefits available. In addition, if at the age of 65 the employee postpones claiming the Employees' Pension so as to increase later benefits, the amount of the Old-Age Employees' Pension that would have been frozen because of continued employment is not applied toward those extra benefits. At relatively moderate incomes, it is possible to receive a full pension and work as an employee at the same time. But for high earners, pension benefits will likely take a hit.
Changes to the pension law that came into effect in April 2022 have eliminated differences in treatment based on age, so the basic rule regarding Zaishoku Rourei Nenkin is easy to state: if the total of your monthly basic pension and your gross monthly salary exceeds ¥470,000, half of the amount above that is deducted from pension benefits.
The situation is not quite as simple as it may appear, however, because of the many variables involved in deciding when to start taking the pension and because of the existence of a transitional pension scheme -- Special Payment of the Employees' Old-Age Pension, or Tokubetsu Shikyuu no Rourei Kousei Nenkin (特別支給の老齢厚生年金) -- that applies to men born on or before April 1, 1961, and women born on or before April 1, 1965. These individuals are entitled to pension benefits between the ages of 60 and 64. These benefits are currently in the process of being phased out, but the existence of this scheme is one important reason why even those under the standard pension age of 65 need to be aware of Zaishoku Rourei Nenkin.
Calculating Zaishoku Rourei Nenkin benefits
To restate the basic rule: if the total of your monthly basic pension and your gross monthly salary exceeds ¥470,000, half of the amount over that is deducted from pension benefits.
First, two definitions:
|Explanation of terms|
|monthly basic pension: the earnings-related portion of the Employees' Old-Age Pension, not including any supplemental benefits or the amount attributable to the Basic Old-Age Pension. The Japanese term is nenkin kihon getsugaku (年金基本月額).|
|gross monthly salary: the sum of the employee's Standard Monthly Remuneration (hyoujun houshuu getsugaku 標準報酬月額) -- which includes transportation allowances, overtime, other allowances, and any bonuses over the maximum of three subject to Employee's Pension Insurance withholding -- and the apportioned monthly amount of up to three bonuses subject to Employee's Pension Insurance withholding over the course of the year (hyoujun shouyo-gaku 標準賞与額). The Japanese term for gross monthly salary is souhoushuu getsugaku-soutougaku (総報酬月額相当額).|
The amounts used for determining gross monthly salary are not the actual amounts received by the employee but the standardized amounts found in the relevant government tables, up to a monthly maximum of ¥650,000 for salary and a maximum of ¥1.5 million for each bonus (so if you receive two bonuses of that amount over the course of the preceding year, the applicable monthly amount would be ¥3 million divided by 12, or ¥250,000). These amounts are often listed on employee payslips, and they will also be found on your personal Nenkin Net page.
The formula corresponding to the basic rule is as follows (employees for whom the sum of the basic monthly pension benefit and the adjusted gross monthly income is ¥470,000 or less receive a full pension):
reduction to benefits = (basic monthly pension + gross monthly salary - 470,000) x 0.5
This amount is subtracted from the basic monthly pension to obtain the benefits actually received by the employee.
- If the employee has had periods of coverage under the Kousei Nenkin Kikin pension scheme, calculations are more complex.
- If the result of applying the formula is a negative figure, the entire pension is suspended, along with any additional pension benefits. The effect in this case is also to negate any potential increases that might have resulted from delaying the pension.
- The Special Payment pension cannot be delayed -- if you don't take it, you lose it.
- For employees who continue working past the age of 70 and have reached that age after April 2017, the reduction in benefits continues even though employees are technically no longer insured under the Employees' Pension Insurance scheme and are exempt from making contributions to it.
Ms. A qualifies for a monthly pension of ¥160,000, and she has a gross monthly salary of ¥480,000.
The applicable reduction is (160,000 + 480,000 - 470,000) x 0.5 = ¥85,000, so Ms. A would actually receive a pension of 160,000 - 85,000 = ¥75,000 while still employed. Ms. A is in effect sacrificing ¥85,000 a month to remain employed, although thanks to the pension, her total monthly income is ¥550,000.
Mr. B qualifies for a monthly pension of ¥120,000, pretty close to the national average, and has a gross monthly salary of ¥620,000.
The applicable reduction is (120,000 + 620,000 - 470,000) x 0.5 = ¥135,000. But ¥120,000 - ¥135,000 is less than zero, so the upshot is that Mr. B's pension is completely suspended while he remains an employee.
If you you have the relevant figures on hand, Casio has a convenient online calculator that will quickly spit out how much your pension benefits would be, including the amount of any reduction and your expected total income.
Receiving a Japanese pension overseas
Upon application, Japanese pension benefits can be received by overseas bank transfer in a number of foreign currencies or in yen, depending on the country. The Japanese Pension Service has a Japanese web page describing the procedures to follow when claiming a pension from overseas. The web page provides links for downloading the various necessary forms and the list of currencies used. Those with a Japanese bank account can choose to have their benefits deposited there.
Overseas recipients of Japanese pensions are required to maintain their eligibility by returning an annual report called a genkyou todoke (現況届) which is sent to the recipient by the Japan Pension Service toward the end of month preceding the recipient's birthday month. The report must be returned by the last day of the recipient's birthday month, and a valid document issued by a government agency or certification by a competent third party must be attached (for Japanese nationals, this will usually be a certificate of residence (zairyuu shoumei 在留証明) obtained within the previous six months from a Japanese embassy or consulate).
Taxation of payments overseas
If Japan has a tax treaty with your country of residence, it is likely that (according to the treaties that editors of the wiki have checked so far - usually Article 17) the pension income is only taxable in your country of residence.
In Japan, pension payments are normally subject to withholding tax at source.
In order to have the pension paid gross without withholding tax being deducted in Japan, it is necessary to file a Form 9 available from the NTA:
- Application Form for Income Tax Convention, etc.
Then, the Japanese pension will be paid gross without having taxes withheld, and you would not need to claim a foreign tax credit in your country of residence. The Japanese web page cited above provides a link to a PDF document listing the 71 countries (as of January 2022) for which such treatment exists.
The pension income would then be subject to taxation in your country of residence.
Both kokumin and kousei nenkin benefits are adjusted annually based on the following factors:
- average wage growth over a three-year period
- cost of living (inflation rate)
- macroeconomic slide
The Pension Reform Act of 2016 stipulates that average wage growth always overrides inflation. So even if inflation had been positive in the previous year, benefits would be adjusted downwards if average wage had been negative.
What's more, the "macroeconomic slide" - introduced in 2004 to take into account changes in overall population, age distribution, wages and prices - limits benefit increases to less than inflation and wage increases. The idea is to lessen the burden on those paying into the system by restraining benefit payments.
If wage growth is negative then the slide adjustment isn't applied, but it is carried forward to future years and will be applied when wages and prices increase.
Here is an example of the calculation for fiscal year 2022-2023:
- wage growth for 2018-2020 (three years) was -0.4%
- inflation for 2021 was -0.2%
- macroeconomic slide is -0.3%
Wage growth overrides inflation, so the benefit payment will be decreased by 0.4%. Since the adjustment is negative, the macroeconomic slide won't be applied. But it will be carried forward to 2023 and beyond, and applied to the first year's calculation that results in a positive adjustment.
Here is a document in Japanese that explains the 2022 calculation in more detail.
Note that these adjustments are applied regardless of where you live when you draw your pension. Unlike some countries' state pension systems (e.g. the UK), they are not frozen when you stop residing in Japan.
- Nenkin Net - guide to the online pension system.
- The Japan Pension Service Official Website.
- How to find your nearest Pension Office
- Pamphlets on the Pension Service in multiple languages
Many thanks to the following RetireWiki.jp users for writing this article:
- Exceptions are available in limited circumstances, see #Exclusions
- Japan Pension Service website: National Pension System
- If you leave the agreement country to work in Japan: Japan National Pension website
- Excluding foreign nationals with a status of residence of Designated Activities Medical Stay or Designated Activities (Long Stay for Sightseeing and Recreation)
- ¥2,400 in principle if starting the pension at 65, though the amount will vary as will the Base Pension amount if a retiree opts for an early or delayed pension start date
- Basic Deduction: NTA Tax Answer No. 1199 (Japanese)
- Pension Tax Deduction: NTA Tax Answer No. 1600 (Japanese)
- 公的年金制度の持続可能性の向上を図るための国民年金法等の一部を改正する法律 (House of Representatives, Japanese)