More of the Same, for Longer
Another year, another pension update. Nothing new, just some new numbers and a chance for people who haven’t really thought about their nenkin before to make sure they understand it.
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, and the Pension Update 2020 here.
So here is my nenkin teikibin for this year:
The key figures are highlighted as follows: 1.) total amount contributed so far (this includes employer contributions from kosei nenkin and public servant nenkin), 2.) number of months contributed (you need 120 to receive a pension and 480 for a full pension), and 3.) my projected pension based on contributions so far.
As you can see I have now paid in just over 9 million yen over a period of 250 months and stand to receive 1,015,032 yen a year as a pension if I stopped paying in now.
Of course I am likely to continue paying for at least another 16 years (probably more like 21), and I am planning to delay receiving my pension in order to receive a larger amount.
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.
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 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 😉
A change in circumstances
I had been assuming my wife and I would end up with Japanese state pensions worth around 200,000 yen a month in retirement, but this estimate is starting to look like it might be on the low side.
So far I have been paying into kosei nenkin (kyosai nenkin) through my employer, and my wife has been paying into kokumin nenkin.
My contract will finish next March, and I was expecting to switch to kokumin nenkin. However, my wife is now planning to incorporate her business. Because of that, we are both likely to enrol in kosei nenkin from next April.
Kosei nenkin is much more valuable than kokumin nenkin, so us paying into it for another 6-11 years (in my wife’s case) and 16-21 years (in my case) is likely to result in pensions worth at least a combined 250,000-300,000 yen a month. Not quite enough to fund the lifestyle we want, but probably enough to pay the bills.
I am a bit confused with your calculation there. You were assuming 200k a month, which is 2.4M a year. If you both pay in 6 more years, your lower estimate is now 2.5M a year? Can you enlighten me?
Argh, mixed my units. Will fix the post. Thanks for the catch!
Phew! I thought there was some catch that I didn’t know about. My assumption is that if I keep paying more in, for example beyond 60, the money we receive will increase.
Hi.
Since the UK has an agreement with Japan for pension totalization, have you looked into that? I’ve read about this a little bit because I did pay pension contributions when I lived in Canada years ago and we have a similar agreement.
Regardless, it would be an interesting article for readers if you are looking for content!
Sadly the UK does not have a totalization agreement with Japan. It has an agreement to eliminate compulsory dual contributions, but nothing to transfer credits.
Ah, that’s too bad. I see it now – a few countries only ‘eliminate dual contributions’ only.
Although it doesn’t impact your directly, I’m sure people would appreciate an article about totalizations.
I see I’m 50 months behind you! 🙂 Just checking my nenkin netto output.
The PDF is much nicer than the paper copy I have to say.
What I’m a little bit confused though is that I’ve contributed 9,453,449 during those 203 months (all kosei nenkin), but the calculated payout for today is only 949,395. Paid more in less time, receiving less?
It’s possible that the public servant kyosai nenkin is slightly more generous (or perhaps was slightly more generous until they nixed it a few years ago). Not sure!