A “conversation” with Desmond P.
A new type of blog post for you today. This is a slightly edited version of an email exchange I had with Desmond P. a couple of months ago about the pension system here. Read on if you want some early Halloween chills 🙂
Desmond P. ​
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“Just had a really terrifying encounter, which I thought to share with you and the wider community.Now, I am sure that everyone in the Retire Japan community has been paying their pensions dutifully, regardless of whether it is the basic, employer or public sector pensions.
Once a year on one’s birth month, a seemingly innocuous postcard will arrive in the mailbox, detailing pension contributions for the past 12 months. Using the information contained in this postcard, we can register for an account on the Japan Pension Service’s website.
http://www.nenkin.go.jp/n_net/index.html
About a week later, another postcard containing the user ID will arrive, thereby allowing one to login and check the expected pension payout upon reaching retirement age. So I went in and did the following:
– Entered my current monthly salary and bonuses
– Chose the options to delay withdrawal up to the maximum allowed (75 years old)
This is what I got:
​Nothing short of absolutely horrifying to say the least. Not even 40% of my current income will be replaced by the corporate pension scheme which I am enrolled in. In fact, it is not even enough for subsistence even though the corporate scheme has higher payouts than the basic scheme.Â
Hopefully the readers, especially those who have been putting off investing for their own retirements, will also do the same and take action.”
​RetireJapan:
“I hadn’t noticed that function on the nenkin website before, but playing with it just now really underestimates my benefits.
I have a rough estimate for my wife and myself as receiving 2.4m a year from 65 under the current rules (I predict we’ll actually receive a lot less) but the calculator is throwing out 800,000 a year!
I think the fact that a lot of my contributions are kyosai nenkin and thus don’t show up in the system is throwing it off.
Pretty depressing stuff though, at least it would be if I was expecting Japan’s pension office to take care of me 😉
I am expecting to receive 0 yen as my pension, anything above that will be a pleasant surprise.
I think a lot of people are going to get an unpleasant surprise though.
Either way, it’s completely out of my control.”
​Desmond P.
“You have got to be kidding me. Â¥800,000 annually under the public sector pension? Wow a lot of people will be in for a very nasty surprise after retirement, if they did not prepare during their working years.
Let’s us hope that the system is not calculating the payouts correctly, so that we get a much more pleasant surprise ;)”
RetireJapan:
“I’ll be pleasantly surprised when I have my pension payments in my hand, not before ;)”
How about you? Are you paying into a pension scheme? Have you looked at the projected payouts?
I’ve been paying into the nenkin system through my companies as long as I worked in Japan (About 8 years), never cared to check the result. I’m worried than when I come back (next year) they’ll make me start from scratch. Fingers crossed that I can find my account back.
As long as you didn’t cash out when you left your contributions should be waiting for you 🙂
For extra safety try and find your pension number or booklet.
I payed for 6 years, left in 2008 cashed in 3 years worth
I returned in 2012 and they said I will now start off at 0…
Basically 3 of my years or lost which is pretty unfair …
I tried to stop paying pension on this basis but thy say I need to pay…
Yes, unfortunately if you take the pension refund (capped at three years) it cancels all your pension contributions.
In principle everyone living in Japan must pay into the pension (although there are allowances for low-income households). It’s not particularly enforced at the moment but I believe it will become more so in the future.
What I find the worst, if I understand, is that as an American we can NOT collect BOTH Japanese pension and american SS. I paid nearly 9 years in the US system. I worked 30 hrs a week sophomore and junior year in high school. I had a special work release in senior year and worked full time. I had jobs all throughout college. So I have paid in some. Then I came to Japan and have paid in 10 years worth. I might be leaving next year or in 5 or who knows (but we want to go back). So if I cash out I lose 7 years if I leave tomorrow. What if I stay 20 years here then move back to the USA? I will have at least enough here to get a few 100$ a month. But can’t collect US SS then. So yeah, it goes double for me, I can not count on ANY government pension at all. Whichever I choose, I will be lucky if it cover the cost of milk in my morning protein shake.
I am finally on track to catching up to where I should be (3x annual salary) by 40.
Hi Bob
As I understand it, US citizens have a good deal as you can add your eligibility from both countries together: https://www.ssa.gov/international/Agreement_Pamphlets/japan.html
For British citizens this is unfortunately not an option.
Hi Bob
As I understand it, US citizens have a good deal as you can add your eligibility from both countries together: https://www.ssa.gov/international/Agreement_Pamphlets/japan.html
For British citizens this is unfortunately not an option.
I believe that the reason it is so low is because they don’t calculate future contributions, just current ones. So this is if you stopped contributing today, you would get 80man a year.If you continue to contribute until retirement, you will get much more out. I have had an increase in the amount they calculate every year as I have contributed more.
Thanks Empress!
That is good to hear. We’ll see how things look in 26 years time for us 🙂
Howdy folks,
No major shock at the figures for the Japanese pension – it’s about what I thought it would be, but the big news I just heard is that the government dropped the minimum requirement to 10 years of payments…down from 25 years.
Has anyone heard any more details? I’ll be going to my local Akita pension office soon to try to apply for it, since I am already over 66, but only will have 18 years in when I retire beginning of 2018. I think I can start collecting both public and private pensions next year, while I’m still working.
Cheers,
Steve
Hi Steve
I believe the minimum period will be shortened to ten years when the consumption tax is raised to 10%. Unfortunately we don’t know when this will happen (I just read an interview with Aso where he said it might be postponed again).
On the other hand if you’ve paid into the US system you might be able to count that towards Japanese eligibility: https://www.ssa.gov/international/Agreement_Pamphlets/japan.html
Let us know if you discover any new information!
Hi Ben,
I thought I’d have to wait until the consumption tax raise, too, but my colleague, Bobby, informed me that the minimum period law was just dropped to 10 years within the last few weeks. I’ll try to visit my local Pension Office tomorrow and find out for sure.
That’s why I was wondering if anyone else had heard about this very recent change.
Also, Keith Adams recently mentioned something called “Kara Kikan” that allows you to get Pension credit for time spent living in Japan, but not paying into the Pension. He used it to qualify just recently.
I hope to know more soon.
Cheers,
Steve
Hi Steve
Exciting stuff! I just did a quick search, and it looks like this is scheduled to come into effect in October next year (although a couple of the sites said that was to coincide with the tax raise. Whether it will still go ahead if the tax raise is postponed remains to be seen).
For kokumin nenkin, if you paid in for ten years you’d get something like 16,000 yen a month at the moment, 40,000 or so if you pay in for 25, and 60,000 for the full forty years.
Kara kikan, as far as I understand it, is the opposite: time you were not in Japan after turning 20. In my case I came to Japan when I was 22, so I could get a couple of extra years eligibility (but not payments) by applying for kara kikan.
Let us know what the pension office tells you 🙂
Scary stuff indeed. Retirement and pension scare the crap out of me at times. I went for years not paying into the system here. For the longest time, I never knew about it and was never informed about it by employers.
I got married this year and my wife said the health insurance alone is worth it, so I asked my boss about shakai hoken and he said sure, so I signed up. The health insurance is not a terrible deal but the pension component just fills me with despair. I’m paying almost 30,000 into it every month which is 30,000 yen less savings I can put into my own investment scheme I set up a few years ago. I got a letter from the pension office a few months ago saying that unless I pay 3 years worth of backpayments, I’m entitled to nothing under the current laws of having to pay in for 40 years to get anything back. They sent me the slips to pay also. 3 nice installments of 2 grand or so. I dunno about you, but I don’t have 6 grand I can just cough up. Especially now since my monthly pension payments are making a reasonable dent in my salary. I haven’t given them any of this money and so far they haven’t chased me down for it. I have a lot more confidence in my own investing skill than the Japanese pension scheme to which I’m seemingly throwing money away into.
To top it off, my home country (NZ) doesn’t have a reciprocal agreement with Japan regarding pensions which doubly makes me want to not give them anything. Thanks to sites like this one, I’ve managed to squirrel away some money and start an investment fund back home. Saving money on a moderate income isn’t easy at the best of times. The Japanese pension system is unsustainable and a financial burden to its citizens. I’ve never had a high opinion of the system and stories like the one in this article really has me worried about my future here.
Hi Leroy
Glad to hear you are enjoying the site/blog. Love to hear from readers.
You currently have to pay in for 25 years to become eligible for payments. 40 years is to receive the maximum payout.
One thing you might look into is you can get any time between turning 20 and when you arrived in Japan as qualifying years (it won’t increase your payout but it might allow you to qualify for a pension). I’ll be doing this for myself soon (I came to Japan when I was 23, so I should be able to get three years towards the 25 year vesting period).
Stay tuned for a blog post on the subject 🙂