Roger Van Zant wrote: ↑Thu Nov 05, 2020 11:35 am
Not correct. 10 years is the minimum you need to pay in to get something back. But with only ten years of contributions, you'll only be getting 1/4 of the full pension; so probably around 30,000 yen per month.
Indeed. Except the full kokumin nenkin is currently 65,000 yen a month, so more like 17,000 yen a month for ten years' contributions. Pretty grim prospect
Sorry, I was going by my own pension estimate which is for 40 years of "kosei nenkin", as opposed to the national one.
I thought my kosei nenkin was bad enough at 120,000 per month after 40 years of paying in 30,000 yen or so per month, but the national one is just diabolical.
Investments:
Company DB scheme ✓
iDeCo (Monex) eMaxis Slim All Country ✓
新NISA (SBI) eMaxis Slim All Country ✓
Japanese pension (kosei nenkin) ✓
UK pension (Class 2 payer) ✓
I'm hoping that Gareth does his research about the national pension fund / nenkin kikin options and comes back and updates us! Although I hadn't realised it was an alternative to iDeCo, so yeah its benefit seems limited.
adamu wrote: ↑Fri Nov 06, 2020 12:53 am
I'm hoping that Gareth does his research about the national pension fund / nenkin kikin options and comes back and updates us! Although I hadn't realised it was an alternative to iDeCo, so yeah its benefit seems limited.
Ok here goes. I'll try my best explain my findings, but I don't fully understand it yet and I may have made mistakes below.
As far I understand it, "kokumin nenkin kikin" or "National Pension Fund" is for category one self-employed folk, but a practically identical product exists for full time employees called "kojin nenkin". Pretty much it depends on which company sells the product.
You need to be paying the Japanese state pension to make use of both of these, and it's essentially a pension top-up.
You pay a monthly fee with no set-up fees. You can choose if you pay it up to 60 or 65 years old.
At the time of joining, you need to choose which plan you want. You can't change the plan once you get going, nor increase the monthly payment. Also you cannot buy another plan as a way to increase the amount. You can only have one top-up plan. However, you can do iDeCo on top of this. You could also decrease the monthly amount, and you can cash out at a loss.
The money is invested on your behalf, differing from iDeCo where you decide the investments.
The minimum is 10,000 yen a month, compared to 5,000 for iDeCo. Presume the maximum is 68,000 yen for the self-employed and 12,000-23,000 depending on what kind of other category you fall into. You can pay using a credit card depending on the company.
The plans are:
15 year plan, from aged 65-80 or 60-75,
10 year plan from 65-75 or 60-70,
5 year plan from 60-65.
There are also different ways to manage what happens to the money when you die at different points during the plan, i.e. dying before you've finished paying the plan or dying part way through your 5, 10 or 15 year term. You can also take the money as a lump sum when you are 65. There also seem to be plans that continue paying until you die regardless of age, but am not entirely sure that's right.
An example I've seen for a 38 year old paying until she is 65 years old, using a 10 year plan from 65-75, can be cashed out if death before 65 but nothing if death is after 65:
10,996 yen a month paying in a total of 3,560,000 yen.
Cash out at 65:
minimum 3,630,000 yen (101.9%), maximum 3,980,000 yen (111.7%)
Receive monthly payments from 65-75:
minimum total 3,734,000 yen (104.8%), maximum total 4,238,800 yen (118.9%)
Meaning minimum monthly payments of 31,116 yen and maximum 35,323 yen
It reduces taxes during the period you pay the monthly fee and the money you get is tax free, just like iDeCo.
So basically, a 38 year has bought a ten year annuity of 31,000-35,000 yen per month for 10,000 yen a month for 27 years without needing to do any work beyond setting it up.
Have seen a similar example for a 36 year old, and the % are a little higher. For the same monthly fee, cash out min 102.2%, max 113.1% and for receiving the monthly payments, min 105.0%, max 120.4%. So the earlier you get started, the better the rate is.
So that's what I have found out. Doubt I could answer any questions! Look forward to hearing your thoughts. Cheers.
Personally I think iDeCo blows nenkin kikin out of the water, but there is potentially a diversification benefit for nenkin kikin, so if you are investing anyway you could do nenkin kikin to diversify your retirement income.
English teacher and writer. RetireJapan founder. Avid reader.
Gareth wrote: ↑Thu Nov 12, 2020 10:10 am
Could you expand on your answer a little bit? Why do you feel iDeCo is so much better? What kind of percentage returns do you reckon are possible?
The benefits of iDeco
(1) Choose from numerous different fund allocations (Domestic/internation - Bonds/Stocks/REITs).
(2) Rebalance for free whenever you want
(3) Choose a lump sum withdrawal or pension-like withdrawal.
(4) Tax-free coming in, tax-free going out.
Returns are not something that can really be predicted, it would depend on your allocations and many other unforeseeable factors. However, potential earning are definitely higher for a more stock-heavy portfolio.
