I must be the only person in Japan who gets excited about receiving their annual nenkin statement. I got home last night and was thrilled to see that it had arrived.
The Nenkin Teikibin
Everyone paying into nenkin should receive an annual update, called nenkin teikibin (ねんきん定期便). This will either arrive by post, usually in the form of a postcard, or (if you have selected the paperless version) will only be delivered via the nenkin website. Personally I like getting the postal version as I want the paper record and find it easier to read than the website (particularly the future pension estimates).
You can see the Pension Update 2017 here (this post explains a lot of the format etc.), the Pension Update 2018 here, the Pension Update 2019 here, the Pension Update 2020 here, the Japan Pension Update 2021 here, the very exciting Japan Pension Update 2022 here, and the Japan Pension Update 2023 here.
This year I received a postcard again.
The front of the postcard shows projections, and includes pension in retirement based on contributions up to last year (1,151,502 a year) and pension in retirement based on contributions up to this year (1,181,163 a year). It also explains how you can receive a larger pension by delaying it, up to a maximum of +84% if you wait until 75 to start receiving it. I am probably going to do this, for reasons explained here, but it’s not going to make a big difference either way.
The annual increase in my pension based on payments so far is pretty shocking. It has only gone up by slightly less than 30,000 yen a year. I have another 16 years or so to pay in, most likely at the kokumin nenkin lower rate, so it looks like my eventual base pension is going to be around 1.6 million yen a year.
That is not a lot of money.
The inside of the postcard has more information.
The key figures are :
1.) total amount contributed so far (this includes employer contributions from kosei nenkin and public servant nenkin as well as contributions to kokumin nenkin): 10,250,585 yen,
2.) number of months contributed (you need 120 to receive a pension and 480 for a full pension): 297 months, and
3.) projected annual pension based on contributions so far: 1,181,163.
Nenkin is valuable
The true value of the government pension is that you can receive it for as long as you are alive, so it provides you with a minimum income even if you become unable to work (or manage your investments!). It also provides diversification as it is not affected by stock market movements, etc.
Nenkin also includes disability insurance, and a survivors pension should you die and leave dependents behind.
Of course, the state pension is unlikely to allow you to live the kind of life you want or are used to, so it is important to also save and invest money on top of this. The Japanese government estimates the average couple will need 20m yen in savings on top of a full pension to help pay for retirement.
Check out some of the resources on the site or ask in the forum if you are not sure how to save and invest your way to 20 million, but using NISA and iDeCo should be enough for most people.
A change in circumstances
Last year I wrote about how my wife was considering incorporating her business (she is currently a sole proprietor) which would result in both of us enrolling in kosei nenkin. I am not sure this is going to happen now, so we will likely continue paying into kokumin nenkin until we reach the maximum 480 months contributed.
We’re both likely to delay receiving the pension to make it larger, as this will give us insurance against living for a long time and managing a pension payment when you are older is much easier than managing investments.
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Hi Ben
I’d be interested in knowing why you and your wife decided not to incorporate your business.
Please write a blog about it.
Thanks
A
Not sure the topic would be a good fit for RJ, so will answer briefly here. The main reason is laziness, I guess! Incorporating seems a lot of work, and results in less flexibility than being a sole proprietor. I think the business is at the point where we would save some money on tax by incorporating, but it doesn’t seem pressing enough for us to actually have done it yet 😉
> “The annual increase in my pension based on payments so far is pretty shocking. It has only gone up by slightly less than 30,000 yen a year. I have another 16 years or so to pay in, most likely at the kokumin nenkin lower rate, so it looks like my eventual base pension is going to be around 1.6 million yen a year.”
Wait a minute, that’s only just over a 1 .8% annual increase. Core inflation was 2.7% last month. Even the central bank’s inflation target is 2%!
So not only should we be telling people that the state pension won’t be enough, but also that it’s value will likely decrease further over time. There should really be stronger messaging from the government about this, rather than them being afraid of scaring people.
Inflation data source: https://asia.nikkei.com/Economy/Inflation/Japan-s-inflation-accelerates-for-third-consecutive-month-in-July
That’s why we do what we do, eh?
Actually, I have found some issues with my nenkin teikibin! Very exciting. Going to call the pension office and see what they say. Might even get another blog post out of it… 😉
Totally agree that 1.6M is not a lot of money. But as you note, your wife will also get a pension. For married couples, especially if the salaryman husband has kousei nenkin, they could probably expect 3M-3.5M between them for a year.
Still not a life of luxury by any means, but not quite as dire as your number for 1 person.
True. My wife has mostly paid kokumin nenkin, so her annual pension projection is under 1m yen. Together our pensions should pay the bills at least!
I should also be getting a UK state pension, which is currently worth almost 2.2m yen a year. That should go a long way to providing us with our discretionary spending.
And then NISA and iDeCo for extravagances.