Company allowing switch from DC Plan matching to iDeco

[Roger Van Zant]

The main reason that the "tax will be very low" though is that the final investment sum will be pretty paltry! Based on an interest rate of 1.5%, I am only looking at about 2.7 million yen after paying in 10,000 per month for twenty years!

Isn't this only part of the picture though? Do you know how much the annuity would be upon reaching your company's statutory retirement age? Is it an annuity until death or for a fixed number of years?

As I understand it, when I retire, I get however much has accumulated as a cash lump-sum. I wish it were more....

[Roger Van Zant]

2.7M - 20x400000 = 2.7M - 8M = Less than Zero = No Tax...

Sorry, it wasn't a question about the tax. To know whether the returns are good or not in retirement (if Roger stays with the company until retirement), we need to be looking at the actual value of the DB pension annuity.

Also another thing to highlight in the event of quitting early, is the retirement payment tax free allowance is shared between the pension payout 脱退一時金 and taishokukin 退職金, if any is received. It sounds like from the sums involved in Roger's case that the limit may not be breached, but for others this may be a consideration.

My company does not offer 退職金. In fact, the main reason for starting this DB scheme was in place of 退職金.
The company which runs my company's DB scheme is this one:
https://www.benefitdb.jp/outline/
If anyone has any insights about this company, I'd be glad to hear them.

The interest is even worse than I thought (I was hoping for 1.5%!):
https://ibb.co/r7sz86w

[beanhead]

My company does not offer 退職金. In fact, the main reason for starting this DB scheme was in place of 退職金.
The company which runs my company's DB scheme is this one:
https://www.benefitdb.jp/outline/
If anyone has any insights about this company, I'd be glad to hear them.

The interest is even worse than I thought (I was hoping for 1.5%!):
https://ibb.co/r7sz86w

Yeah, it is not an investment.
Think of it as a forced savings scheme. I know it takes up part of your iDeCo allocation, so it is annoying, but there is nothing you can do about it.

Benefit One is a big company, and the actual investment part is done by Orix, not them. So large companies are behind this. Your money is fairly safe. It won't grow much, if at all (in real terms), but you also probably wouldn't have wanted them to put this 'retirement money' in Bitcoin or Russian stocks or something either.

[Roger Van Zant]

My company does not offer 退職金. In fact, the main reason for starting this DB scheme was in place of 退職金.
The company which runs my company's DB scheme is this one:
https://www.benefitdb.jp/outline/
If anyone has any insights about this company, I'd be glad to hear them.

The interest is even worse than I thought (I was hoping for 1.5%!):
https://ibb.co/r7sz86w

Yeah, it is not an investment.
Think of it as a forced savings scheme. I know it takes up part of your iDeCo allocation, so it is annoying, but there is nothing you can do about it.

Benefit One is a big company, and the actual investment part is done by Orix, not them. So large companies are behind this. Your money is fairly safe. It won't grow much, if at all (in real terms), but you also probably wouldn't have wanted them to put this 'retirement money' in Bitcoin or Russian stocks or something either.

All true. At least I can still put 12,000 yen into my iDeCo each month....better than nothing!

I can't remember the pros/cons of a DB v. DC scheme. I looked it up once.
I was led to believe DB is "better" than DC, but in my case, I think the DB scheme I am in is pretty....crap.

[RetireJapan]

I can't remember the pros/cons of a DB v. DC scheme. I looked it up once.

Are you sure you understand the conditions of your DB scheme?

Usually, defined benefit (DB) schemes promise a certain level of payout, like a pension, with the provider/employer taking on the risk/responsibility for guaranteeing it. This is the reason most companies no longer provide DB schemes, as they can be extremely expensive for the company.

Defined contribution (DC) schemes, on the other hand, don't guarantee anything, just providing the market return on the amount put in. Thus the risk is on the part of the individual who owns the account.

If you maintain the account until the end, are you not going to get an income in retirement?

[Roger Van Zant]

I can't remember the pros/cons of a DB v. DC scheme. I looked it up once.

Are you sure you understand the conditions of your DB scheme?

Usually, defined benefit (DB) schemes promise a certain level of payout, like a pension, with the provider/employer taking on the risk/responsibility for guaranteeing it. This is the reason most companies no longer provide DB schemes, as they can be extremely expensive for the company.

Defined contribution (DC) schemes, on the other hand, don't guarantee anything, just providing the market return on the amount put in. Thus the risk is on the part of the individual who owns the account.

If you maintain the account until the end, are you not going to get an income in retirement?

Your Japanese is no doubt better than mine.
What do you make of the Japanese in this image, and of the link I included above?
I thought it translates as DB as opposed to DC….my company also said it was a DB scheme. Yet it appears to function as a DC scheme. It’s really confusing.
https://ibb.co/8bgJDMH

[RetireJapan]

Your Japanese is no doubt better than mine.
What do you make of the Japanese in this image, and of the link I included above?
I thought it translates as DB as opposed to DC….my company also said it was a DB scheme. Yet it appears to function as a DC scheme. It’s really confusing.
https://ibb.co/8bgJDMH

Well, 'kigyou nenkin' would seem to imply some kind of pension payment, rather than a lump sum. I'd need to see a bit more though

[TBS]

Yes, looking through the website it is a "defined benefit" scheme. But it is not what the majority would understand by the term. The pension isn't linked to the employee's final salary or average salary over the contributing term.

It looks like the way it works is the guaranteed return is the sum of your contributions and a kind of average of the performance of the underlying investments (mainly 10y JP gov bonds?) over the term. An insurance company guarantees the returns, backed up by your company if they fail.

The returns are poor (as you already know ) but this is by design as the whole system is set up to minimize the risk to the company, along with minimizing the administrative burden and their accounting/legal hassles.

If you retire after having paid in more than 20 years, you can choose to receive either the lump sum payout or an annuity for the next 10 years. I couldn't find information on how to calculate the annuity. This info is probably within the password protected area.

You are right, it will likely be trounced by iDeco if you could invest the money there instead. But iDeco returns are not guaranteed, and as beanhead says, one way to think of it is like a forced savings account. The interest rate of this savings account is much better than what you'd get at the bank. So in that sense for many Japanese people this scheme is a "good deal", because they'd just be holding cash otherwise. Unfortunately you and the rest of this forum's members already know there is a better way

[TBS]

The interest is even worse than I thought (I was hoping for 1.5%!):
https://ibb.co/r7sz86w

BTW sorry to bear more bad news, but I don't think this is the actual interest rate you're receiving. This is the year to 2021/6 growth of the underlying assets. The yearly returns used to calculate the actual payout are these: https://www.benefitdb.jp/upload/rate_pr ... 202111.pdf
varying between 0.5 to 1.5% over the past 12 years.

[Roger Van Zant]

The interest is even worse than I thought (I was hoping for 1.5%!):
https://ibb.co/r7sz86w

BTW sorry to bear more bad news, but I don't think this is the actual interest rate you're receiving. This is the year to 2021/6 growth of the underlying assets. The yearly returns used to calculate the actual payout are these: https://www.benefitdb.jp/upload/rate_pr ... 202111.pdf
varying between 0.5 to 1.5% over the past 12 years.

Many thank for your two posts above!
Yeah, I wish I had found out about RetireJapan before my company got me hooked into this stupid scheme. Oh well!