Kojin Nenkin (private individual pension)

[Gareth]

It is fairly standard to receive a tax deduction for life insurance premiums. This would no different from the deduction you would get from a standard term, or life policy though, correct?

There seem to be three categories under the 生命保険料控除 (life insurance deduction) section. Firstly 一般の生命保険料 (general life insurance premiums), secondly 介護医療保険料 (long-term care medical insurance premium) and thirdly 個人年金保険料 (individual annuity premium). Kojin nenkin comes under the third category. You can get up to 40,000 yearly income tax deduction for each category for a total of 120,000.

[Kanto]

It is fairly standard to receive a tax deduction for life insurance premiums. This would no different from the deduction you would get from a standard term, or life policy though, correct?

There seem to be three categories under the 生命保険料控除 (life insurance deduction) section. Firstly 一般の生命保険料 (general life insurance premiums), secondly 介護医療保険料 (long-term care medical insurance premium) and thirdly 個人年金保険料 (individual annuity premium). Kojin nenkin comes under the third category. You can get up to 40,000 yearly income tax deduction for each category for a total of 120,000.

This is interesting stuff. Thank you.

個人年金保険料控除は、一般の生命保険料控除や介護医療保険控除とは別枠で利用できる所得控除です。 その控除額は最高で所得税40,000円、住民税28,000円なので、実際に安くなる税金は一般的な会社員の場合で約7,000円～10,000円程度です

The individual annuity premium deduction is an income deduction that can be used separately from the general life insurance premium deduction and nursing care medical insurance deduction. The maximum deduction amount is 40,000 yen for income tax and 28,000 yen for inhabitant tax, so the actual tax reduction is about 7,000 to 10,000 yen for a general office worker.

https://hoken.niaeru.com/media/life-in ... 9%E3%80%82

[fools_gold]

There seem to be three categories under the 生命保険料控除 (life insurance deduction) section. Firstly 一般の生命保険料 (general life insurance premiums), secondly 介護医療保険料 (long-term care medical insurance premium) and thirdly 個人年金保険料 (individual annuity premium). Kojin nenkin comes under the third category. You can get up to 40,000 yearly income tax deduction for each category for a total of 120,000.

I pay 4,000 yen per month into a kojin nenkin plan at work just to max out the deductions. I treat it as part of my bonds allocation. I'm not entirely sure if it's worth the hassle though.

[Gareth]

Thanks for all the replies. Think I am getting closer to understanding this product.

So it's life insurance plus investment. If I set the policy to finish at 65, if I die before that, it's essentially life insurance. If I live to 65, it's a ten year annuity, the amount rising due the investment done by the company. Is that right?

For the life insurance part, here is a selection of the amount that can be received by my heir:

Year 1 (aged 41) - total paid in 24man / death payment 25man
5 (45) - 124 / 126
10 (50) - 248 / 252
15 (55) - 373 / 379
20 (60) - 497 / 505
25 (65) - 622 / 632

Is that good or bad compared to standard life insurance policies?

For cancellation, if there is no dividend, I can 100% of the money back from year 22 aged 62. If a dividend is paid, I could get 100% of the money back from year 14 aged 54.

[sutebayashi]

The missus reckons it's good to do this. She says it's better than keeping cash in a bank account. It's lower risk than iDeCo. It's guaranteed to increase, even if the rate is low. There are no fees. It's easy to set up and requires no management.

That is largely true.

My missus also had us lock away money in a "Gakushi Hoken" product after our first kid arrived, which is also from Nissay, and also the returns of 120% (years from then) looked better than nothing, providing I pay in the "premiums" over the first 10 years.

I was against it at the time, but gave into the pressure after at least finding a "Gakushi Hoken" product that wasn't certain to lose money. Yes, when I looked at alternatives from the Post Office initially, I found that they were guaranteed money losers!!
The Post Office man and the deceived aunts would say "well that's because insurance isn't free", but remember the insurance company gets close to 2 decades to make money out of your money, instead of you and your wife making the money with it instead.

So what you do lose with such insurance products, is the opportunity to make the money work more for you or use it as you please during that time.

By the time our second kid arrived, I was into investing though NISA, and armed with more knowledge, managed to convince my wife that not locking ourselves into another "Gakushi Hoken" product was a smarter idea.

The compromise approach is a good idea. Give her a bit of what she is comfortable with, and request to do a bit of what you are comfortable with. Compare the results as time goes by and your knowledge and comfort increases.

My wife has a NISA account now too, which she is comfortable with me maxing out (thanks to the stock markets not crashing recently, but I have told her that if they do crash then we will be buying more, not selling out of fear.) so minds can change over time.

She sees no good reason to not do it in addition to iDeCo.

It's better than putting it in a term deposit for 20 years, I grant you that.

But the prime beneficiary of that use of your money, is the life insurance company. They are basically paying salaries and office rent off the backs of risking your money instead of you, and giving you a tiny bit back years from now, as well as potentially paying a life insurance claim if you all get unlucky.

Whatever you do, don't commit too much money to such a scheme. Commit only as much as you need to to keep your wife content. And over time, learn about passive investing (hopefully with her), and so long as she doesn't get annoyed, keep mentioning to her how the US Dow Jones stock market index is 30,000 now whereas it used to be 6,000 some 30 years ago, and how long term buy-and-hold investors do pretty well!

[sutebayashi]

There seem to be three categories under the 生命保険料控除 (life insurance deduction) section.

Yup, I am filling out these pesky year-end tax adjustment forms due to my life insurance policies every year, and submitting the insurance certificates etc accordingly (I really hate this annual paper-work).

The key thing here, is only buy the insurance product if you want / have to. Not because of any tax deductions you might get if you do start paying for insurance.

The tax deductions make buying insurance products a marginally less worse idea, but it is a pain in other ways. Anyway once you get some insurance, the tax certificates will be sent to you around October each year, and then you stash them away with your tax related stuff then if you are self-employed.

If you are self-employed I guess you file a tax return in March, so it probably doesn't matter, but I would suggest that salaried workers avoid signing up to lump-sum insurance plans in November / December. The reason is this pesky year-end tax adjustment stuff just gets more painful, because the insurance company can't send an official certificate for your annual premium until after you have paid for the year. But this means one needs to send year-end tax adjustment stuff to company payroll by November, but in my case I don't get some insurance certificates until December, so this makes it even more painful for a poor gaijin who only writes Japanese once or twice a year when the tax system demands it

[Kanto]

Thanks for all the replies. Think I am getting closer to understanding this product.

So it's life insurance plus investment. If I set the policy to finish at 65, if I die before that, it's essentially life insurance. If I live to 65, it's a ten year annuity, the amount rising due the investment done by the company. Is that right?

For the life insurance part, here is a selection of the amount that can be received by my heir:

Year 1 (aged 41) - total paid in 24man / death payment 25man
5 (45) - 124 / 126
10 (50) - 248 / 252
15 (55) - 373 / 379
20 (60) - 497 / 505
25 (65) - 622 / 632

Is that good or bad compared to standard life insurance policies?

For cancellation, if there is no dividend, I can 100% of the money back from year 22 aged 62. If a dividend is paid, I could get 100% of the money back from year 14 aged 54.

Are both of you working? Do you have children?

When it comes to life insurance, it really depends on personal situations.

My wife and I will only remain insured until our children are all out of college. By then we will be in our 50`s/60`s. We can choose not to continue the term policy. IMO you need more money when you are younger in the event of an accident or death.

[RetireJapan]

My wife and I will only remain insured until our children are all out of college.

I cancelled mine when our youngest daughter finished uni. Our investments are healthy enough that I don't worry about my wife were I to get hit by the proverbial truck tomorrow.

[sutebayashi]

So it's life insurance plus investment.

I would say "life insurance plus savings", since the return on the investment side is more akin to a savings return.

Is that good or bad compared to standard life insurance policies?

I think a plain simple life insurance policy will always work out in your favour, but it's also a matter of whether your wife is comfortable.

If she is amenable to considering other ideas, having her Google for " 保険　掛け捨て　貯蓄型 " should turn up some articles from Financial Planners and the like, comparing the two. If she reads them and still wants to go with it then not much more you can do to convince her otherwise at this stage I'd say! (Another idea is to actually talk with a financial planner or Insurance advisor, if she is the type to be convinced by face-to-face interaction - not a Nissay sales-lady of course, a more neutral one)

[Gareth]

Thanks for all your replies. Very helpful.

I understand the limitations of this product now. I've still decided to do it, but with a smaller amount than the example I first detailed.

So I'll have full UK state pension, 3/4 Japan state pension, 26 years of fuka nenkin, 4 million yen kojin nenkin, 6 months of cash saved, and am about to get cracking on iDeCo and Nisa. How does that sound?