積立 (tsumitate) NISA

A new option

Last August I wrote about the new NISA proposals. A few things have changed since then, and the 積立 (tsumitate, or regular saving) NISA is starting next January. Let’s take a look at what it is and who might want to use it.

First of all, regular NISA and Junior NISA accounts will not change. The 積立 NISA is a new option that will be available alongside regular NISA accounts. You will be able to choose between a regular or 積立 NISA account each year.

The new option seems to have been introduced to make NISA a bit easier to understand and encourage more people to invest.

The new NISA option allows you to invest less, in fewer products, for much longer. It also makes it easy to set up regular monthly investments (hence the name).

So it seems the new account is a bit of a fudge. I would have much preferred for the government to extend the duration of the normal NISA account (or make it indefinite, like the UK one). Clearly the tax office wasn’t willing to do this and we are left with two flawed options.

So who should use the new NISA account?

If you are only able to invest up to around 500,000 yen a year, then the new NISA is clearly a better option. The restriction to mutual funds shouldn’t be too much of a burden as long as you choose a provider that offers a range of no-fee funds. The longer duration will allow your investments to grow tax-free much more.

If you are already able to max out a normal NISA (1.2 million a year), then I am not sure which is the better option.

​If you max out normal NISA accounts and always put in new money, then after five years you should have 6 million yen invested tax-free.

Switching to the 積立 NISA and maxing that out would result in 8 million yen invested tax free, but it would take you sixteen years to invest more than you could in the normal NISA accounts.

Personally I find maxing out the NISA is a good goal for me, and one that helps me invest as much as possible.

I think I will continue using normal NISA accounts and continue hoping that the government will increase the contribution limits and the tax-free duration.

How about you? Which NISA account do you think you will use next year?

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12 Responses

  1. Any idea on how it’s going to work to choose? This is my first year using NISA, but will I have to somehow close the one I have now? I’m thinking the tsumitate will be best for me, because when adding together my employers DC scheme, wife’s iDeCo, a NISA each, and two Junior NISA accounts for the kids, there’s no way for us to get even close to our max every year

    1. Hi Paul
      Each year’s NISA is treated separately, so I assume* that there will be an option to choose what type of NISA you want in 2018. You shouldn’t have to do anything to current NISA accounts.
      * usual caveats apply to assumptions 😉

      1. So does that mean you have to apply & send in documents every year, or is it just a one-click thing from the second year?

      2. So far it’s been 1-click, and I hope that will continue 🙂
        I guess we’ll find out later in the year when they roll out the interface…

  3. I am thinking that the Tsumitate might be a better option for my daughter’s JR NISA. Is the maximum you can invest 500,000 yen per year? I have a feeling the recent thread in the forum said it was 400,000…?

    1. The 積立NISA is only available for people 20 or over, so it can’t be used as a Junior NISA alternative.

      1. “The 積立NISA is only available for people 20 or over, so it can’t be used as a Junior NISA alternative.”
        ^^^ Gyah! I just checked back in here and saw this. That’s a shame–it would have been a good fit for a JR NISA…

      2. Absolutely! The longer time period makes a lot more sense in the Junior NISA… hopefully it will become an option in the future 🙂

  4. The limit for the new account is 400,000 yen. Sorry that wasn’t clear!
    Not sure this new version will be available in Junior NISA -will investigate 🙂

  5. Sorry to go back to this point, but Rakuten are currently advertising for people who want to start on the tsumitate next year so I’m thinking about it. Is there no reason not to do the 2 types consecutively, (5 years then 15 years for a maximum total of 12m yen) or does it not work that way? If I max out the first, regular, NISA, does that mean I have only 2m left for the next 15 years of the tsumitate? Bit confused.

    1. Hi Adam
      Good timing! I got that email too, and will run a blog post about the new system next week (Wed).
      My understanding is that each year is treated separately, so you shouldn’t have any problem doing 5 years of normal followed by 15 years of tsumitate.
      However, I hope that the normal NISA accounts will be renewed or replaced with something similar when they expire in five years’ time.
      We will learn more as time goes on. Stay tuned for the post on Wednesday, hopefully we’ll get a discussion going 🙂