Delaying pension

[Tkydon]

1) 5 years of voluntary contributions costs 60 * ¥16,520 = ¥991k

You initially pay this out of Post Tax Income, but you can claim the contributions as a Tax Deduction against Taxable Income, so that you actually pay this out of Pre-Tax income so would get any withheld income tax back as a refund at the end of the year, so the government pays the tax portion.
Depending on Tax Band.... 5.105%, 10.21%, 20.42%, 23.483%, 33.693%, 40.84%, or 45.945%... if the contributions fall within a single band...
However, you also get the deduction against your Residents' Taxes at 10%

Therefore, it only costs you roughly say

Y659,183 and the goverment pays the other Y331,816
or
Y558,002 and the goverment pays the other Y432,997

And, you can drop the refund into NISA tax free.

If you don't pay these voluntary contributions, you don't get any tax refund.

Your equivalent NISA investment will cost the Post Tax ¥991,000

2) This will ‘earn’ an additional 60/480 * ¥795k = ¥99k pa (¥8,300 pm)

This is for the Kiso Nenkin - Basic Pension
https://www.nenkin.go.jp/international/ ... nsion.html

But differs for the Kosei Nenkin - Employee's Pension
https://www.nenkin.go.jp/international/ ... loyee.html

See the sections
Benefits
Old-age Employees' Pension for age 60-64

and

Old-age Employees' Pension after age 65

[Moneymatters]

Here's my thinking, assuming my calcs are correct:

1) 5 years of voluntary contributions costs 60 * ¥16,520 = ¥991k

2) This will ‘earn’ an additional 60/480 * ¥795k = ¥99k pa (¥8,300 pm)

(The ‘macroeconomic slide’ (as detailed at the end of the RetireWiki > Japan pension system), if I understand correctly, doesn’t exactly give me confidence this will be maintained.)

2) is roughly equivalent to ¥2.5m at 4% drawdown in a NISA

I would feel more confident putting the ¥991k in my NISA and it growing to ¥2.5m (including drawdowns) over the next 25 years than the J pension staying at that rate for the same time (or even existing that long).

I know the nenkin can be considered a safe minimum income for life, but if that ¥8,300 per month is that important, I think you’re in trouble.

I’ve also wondered about this macroeconomic slide. But voluntary contributions close to retirement are a no brainer to me.

At least I think we are talking about voluntary contributions aged 60-65.

You are comparing to growth achieved over 25 years…
That isn’t a fair comparison..

[banders]

You are comparing to growth achieved over 25 years…
That isn’t a fair comparison..

I'm saying that I would rather invest ¥16k pm in NISA for 5 years than voluntary nenkin for 5 years. I just think the returns would be better. It's a gamble, but what's the worst I could lose? ¥8,300pm, if NISA goes to zero. Big deal. The upside is much better.

[Moneymatters]

You are comparing to growth achieved over 25 years…
That isn’t a fair comparison..

I'm saying that I would rather invest ¥16k pm in NISA for 5 years than voluntary nenkin for 5 years. I just think the returns would be better. It's a gamble, but what's the worst I could lose? ¥8,300pm, if NISA goes to zero. Big deal. The upside is much better.

“ I would feel more confident putting the ¥991k in my NISA and it growing to ¥2.5m”

So we agree we are only talking about contributions aged 60-65. So you’ve ONLY got 5 years or monthly investments to get to your 2.5m.
Luckily. Thanks to “the magic of compounding” you’ll only need a sustained growth rate of(checks notes) 35%…

If I’ve misunderstood the comparison you were making I apologize. I just think it’s important to get things ringo to ringo when possible..

[banders]

Yes, my mistake. For my example to hold true, that ¥2.5m would have to be in my NISA at the start of my retirement, so would have to grow within the 5 years. I was thinking about it having 25 years to grow. I've spent too long on the computer these last couple of days and my brain is getting mushy.

That's why these conversations are useful!

[Tkydon]

You are comparing to growth achieved over 25 years…
That isn’t a fair comparison..

I'm saying that I would rather invest ¥16k pm in NISA for 5 years than voluntary nenkin for 5 years. I just think the returns would be better. It's a gamble, but what's the worst I could lose? ¥8,300pm, if NISA goes to zero. Big deal. The upside is much better.

You can invest ¥16k pm in voluntary nenkin for 5 years, and get the approx. Y6k tax refund and invest that in NISA for 5 years...

[Fran]

As the UK pension is fixed for Japan residents when you retire, if you delay your UK pension, will it be fixed at the higher rate? If Japan continues with this low rate of inflation compared with the UK could this make delaying your UK pension even more attractive? Any opinions?

[RetireJapan]

As the UK pension is fixed for Japan residents when you retire, if you delay your UK pension, will it be fixed at the higher rate? If Japan continues with this low rate of inflation compared with the UK could this make delaying your UK pension even more attractive? Any opinions?

I believe under the current rules the pension goes up under the triple lock until you reach pension age and start to receive it. If you choose to delay taking your pension, the base pension is then set at that level and you get the increase for delaying but no longer get any inflation/earnings/cost of living increases.

[Bubblegun]

I don't think it is worth delaying the pension. The break-even point for deferring is about 20 years. Taking into account that the average life expectancy is 80 in the UK, we are throwing the dice. and generally, as we get older we tend to spend much less, and in poorer health.(something most people forget)
https://www.moneysavingexpert.com/savin ... e-pension/

So the break even point if we delay our pension from 67 to 68 yoa is 88 years old. Each year deferred only gives us about 5% extra.

[Wales4rugbyWC23]

I don't think it is worth delaying the pension. The break-even point for deferring is about 20 years. Taking into account that the average life expectancy is 80 in the UK, we are throwing the dice. and generally, as we get older we tend to spend much less, and in poorer health.(something most people forget)
https://www.moneysavingexpert.com/savin ... e-pension/

So the break even point if we delay our pension from 67 to 68 yoa is 88 years old. Each year deferred only gives us about 5% extra.

For those of us in our forties that is the age we will start to receive the British state pension.