Guest Post: Hooray for Fuka Nenkin

It’s pretty good, I guess

Today we have a guest post from RetireJapan reader and forum contributor kuma. It was actually a forum post, but it was so good that I asked if I could publish it on the blog. Kuma kindly agreed so here it is 🙂

Some background reading

First, some background reading: 1) the official nenkin page in English https://www.nenkin.go.jp/international/ … nsion.html, 2) the first RetireJapan post on this topic Overpaying Kokumin Nenkin, and 3) the second post Fuka Nenkin 2.

Fuka Nenkin

Just wanted to share my experience in case it’s useful to others… [RetireJapan: very useful, thank you!].

When I first heard of fuka nenkin, an additional pension scheme for those without company pensions, I thought the rates sounded great but the returns seemed too trivial to bother with. I got on with my life. Months later I had another look, and realised it could net me over a million yen, or provide a simple hot meal every day in my retirement. A tiny 2.44% increase on kokumin nenkin contributions (400 yen on top of the usual 16,410 yen a month) would lead to a tasty 12.3% increase to the monthly pension payout (200 / (780,100 / 480)).

Paying in 400 yen per month and receiving 200 per month x number of contributions for life upon retirement is a fantastic deal; a government-backed annuity with a rate of 50%. This is much better than the 10% rate of basic kokumin nenkin (the back of the envelope calculation is 200k in –> 20k out).

But isn’t it too trivial to be any good? Well, I’m 38 and a freelancer. Were I to contribute 22 years, I’d pay in 400 x 12 x 22 = 105,600 yen. In my retirement, I’d receive 52,800 yen per year (4,200 yen per month) on top of my basic pension. If I drew a pension for 20 years and the fuka nenkin rules remain unchanged, my benefits from this scheme would be more than 1,000,000 yen. Even after two years of retirement, I’d break even. And all for 400 yen a month, which is such a trivial amount (1 luxury coffee; 3 vending machine drinks; or 1 return subway ride to the city centre) that I can very easily make the necessary savings every month. The ~50k annual benefit may still sound trivial, but 150-ish yen a day (or a pound, in my British brain) might be very welcome in my old age; it could probably provide a simple hot breakfast (eg sanma, rice, veg, miso soup). For life. Even if the government changed the deal, they’d have to downgrade it monumentally for it not to be worthwhile in my opinion.

I signed up in April, two and a bit years into my Japanese residency. It was very easy to do so at my ward office in Sapporo (RJ and others advise that the pension office is a better bet; but I had other business at the ward office and the simplicity of the task seemed quite un-mess-up-able, so I took my chances). As per kokumin nenkin, the payment slips received through the post had the option of a small discount for paying multiple months together. Of course, there are the tax breaks too; the 4,800 yen (or a bit less, if you go wild and pay the 12 months of contributions in one go) reduces your taxable income, meaning less money goes to the taxman and slightly more is retained by you. 

This was the first foray into improving my retirement provision in Japan. It didn’t require any comparison of providers nor any thinking about investment choices and contribution levels. And no grappling with anything that would stretch my language skills. A simple walk to the ward office where I wrote my name and the date on a form, a six-ish week wait, then cold hard cash at the konbini. 

What about other people? Do the kokumin nenkin folk sign up for this? Any fans or detractors of the scheme?