RetireJapan

I pay 10,000 yen monthly into a company pension scheme.
They call it a 選択制確定給付企業年金 in Japnese, which I believe makes it a "DB" scheme.
However, I don't believe it truly is a DB scheme.

Anyways, I was looking at the company's webpage (the company that runs this scheme):
https://www.benefitdb.jp/feature/rate_p ... /index.cgi

What does the section in red mean?
※再評価率は、事業年度ごとに国債応募者利回り（10年もの）の過去5年平均と過去3
年平均のいずれか低い率（上限4.5%）を毎年7月から翌年6月までの1年間適用

I truly regret joining this horrible scheme.
Just look at those whopping rates of return in the tables at the bottom of the page!
My 10,000 yen would be much better off in my NISA....
But I cannot leave unless I quit my company or hit retirement age.
I am considering dropping my monthly contribution down to the minimum 1000 yen, actually.

Thanks.

That does look painfully low. Cash balance plans tend to work this way. They are "defined benefit" so the plan must invest in something that gets a guaranteed return, hence the use of those awful government bond rates. In the US these are used especially by high income earners in small businesses (e.g. physicians in a partnership) because you can shelter a lot of income from taxes based on how old you are (the more the older you are because you are closer to retirement age and the plan must be fully funded) then you terminate the plan and can roll the money into a qualified retirement account which invests in more uncertain but better returning assets (e.g. a stock market index fund in the equivalent of an IRA or 401K). At your company you are stuck with the worst aspects of a cash balance plan (low returns from using a guaranteed investment like JGBs) without the attractive, tax-advantaged exit strategy. I think in your situation I would also try to limit the damage by making my voluntary contribution as small as possible.

Roger Van Zant wrote: ↑Fri Dec 01, 2023 2:39 am I pay 10,000 yen monthly into a company pension scheme.
They call it a 選択制確定給付企業年金 in Japnese, which I believe makes it a "DB" scheme.
However, I don't believe it truly is a DB scheme.

Anyways, I was looking at the company's webpage (the company that runs this scheme):
https://www.benefitdb.jp/feature/rate_p ... /index.cgi

What does the section in red mean?
※再評価率は、事業年度ごとに国債応募者利回り（10年もの）の過去5年平均と過去3
年平均のいずれか低い率（上限4.5%）を毎年7月から翌年6月までの1年間適用

I truly regret joining this horrible scheme.
Just look at those whopping rates of return in the tables at the bottom of the page!
My 10,000 yen would be much better off in my NISA....
But I cannot leave unless I quit my company or hit retirement age.
I am considering dropping my monthly contribution down to the minimum 1000 yen, actually.

Thanks.

You are only actually paying approx 50% to 70% of that Y10,000, or Y5,000 to Y7,000 of the Y10,000 into the scheme. The other approx 30% to 50% is paid by the government as the Y10,000 is deducted from your income pre-tax, so you do not pay National Income tax at your marginal rate plus Residents' Taxes at 10% plus National Health Insurance Premium that you would have had to pay on that money otherwise.

If you put money into NISA it is from post-tax income, after you have already paid National Income tax at your marginal rate plus Residents' Taxes at 10% plus Health Insurance on it. So, the equivalent Y10,000 of Gross Salary would be hit with approximately Y3,000 to Y5,000 of taxes leaving only Y5,000 to Y7,000 of the Y10,000 to invest into NISA.

Or the other way round, If you pay Y10,000 into NISA, it would be the equivalent of approx Y13,000 to Y15,000 of equivalent Pre-Tax Income, so Y10,000 into NISA is costing you more than Y10,000 into your pension scheme.

Tkydon wrote: ↑Fri Dec 01, 2023 6:40 am

Roger Van Zant wrote: ↑Fri Dec 01, 2023 2:39 am I pay 10,000 yen monthly into a company pension scheme.
They call it a 選択制確定給付企業年金 in Japnese, which I believe makes it a "DB" scheme.
However, I don't believe it truly is a DB scheme.

Anyways, I was looking at the company's webpage (the company that runs this scheme):
https://www.benefitdb.jp/feature/rate_p ... /index.cgi

What does the section in red mean?
※再評価率は、事業年度ごとに国債応募者利回り（10年もの）の過去5年平均と過去3
年平均のいずれか低い率（上限4.5%）を毎年7月から翌年6月までの1年間適用

I truly regret joining this horrible scheme.
Just look at those whopping rates of return in the tables at the bottom of the page!
My 10,000 yen would be much better off in my NISA....
But I cannot leave unless I quit my company or hit retirement age.
I am considering dropping my monthly contribution down to the minimum 1000 yen, actually.

Thanks.

You are only actually paying approx 50% to 70% of that Y10,000, or Y5,000 to Y7,000 of the Y10,000 into the scheme. The other approx 30% to 50% is paid by the government as the Y10,000 is deducted from your income pre-tax, so you do not pay National Income tax at your marginal rate plus Residents' Taxes at 10% plus National Health Insurance Premium that you would have had to pay on that money otherwise.

If you put money into NISA it is from post-tax income, after you have already paid National Income tax at your marginal rate plus Residents' Taxes at 10% plus Health Insurance on it. So, the equivalent Y10,000 of Gross Salary would be hit with approximately Y3,000 to Y5,000 of taxes leaving only Y5,000 to Y7,000 of the Y10,000 to invest into NISA.

Or the other way round, If you pay Y10,000 into NISA, it would be the equivalent of approx Y13,000 to Y15,000 of equivalent Pre-Tax Income, so Y10,000 into NISA is costing you more than Y10,000 into your pension scheme.

Oh, this had not occurred to me. Thanks for pointing out.
Hmmm....sure wish this scheme had a better interest rate than 0.5%~1.5% though....