By Yoneyama, 2022 March
Japan’s Public Pension System（日本の年金制度について）Vol.1
This week and thereafter, we would like to talk about the Japanese public pension system. Japan’s public pension system consists of the following three different pension accounts.
Whoever living in Japan including foreigners are obligated by law to participate in one of the three accounts based on your job status:
The National Pension（国民年金）
Mutual Aid Pension（共済年金）
If you are hired by an employer and work for a company in Japan, you belong to Employees’ Pension through your company. If you become a public servant or a teacher of a private school in Japan, you are required to join Mutual Aid Pension. If you come to Japan as a spouse of a Japanese who works in Japan, and if your age is between 20 years old and 59 years old, and if you stay home without joining a company or a public office or a private school, you belong to the National Pension.
In this case, your monthly pension insurance premium of the National Pension is covered by your spouse’s Employees’ Pension or Mutual Aid Pension. If you join Employees’ Pension or Mutual Aid Pension, your monthly pension insurance premium is calculated with a certain percentage to be decided by your standard monthly salary, and withheld by your company, public organization or private school when you receive the monthly salary. Your employer is required to share the same amount as what you bear and to pay the total amount to a local pension office every month.
Assuming that you are hired by a company in Japan, we will talk about Employees’ Pension (厚生年金) further in detail. First, let’s talk about its monthly premium to be withheld from your salary.It is 18.3% for every employee.Its half portion is paid by your employer, so your share is 9.15%.It is applied to not only your monthly salary, but also bonus such as summer bonus and winter bonus. For easiness of calculation, the government defines and renews your standard monthly salary every September by averaging what you earned from April through June in that particular year. Likewise, your standard bonus amount is renewed every August and February. When you join Employees’ Pension, you receive a pension note (年金手帳), which shows your basic pension number (10 digits). When you change your address or when you claim pension when you become eligible, you are requested to present this booklet.
In 2016, the government of Japan introduced the My Number Card system that identifies an individual living in Japan by a 12-digit number for tax and social insurance and some other government services. My number card can now work for pension note, and in fact, 年金手帳 will no longer be issued from April this year. You, however, still receive 基礎年金番号通知書 basic pension number card. So, even if you do not possess your My Number Card yet, you can still take necessary procedures of pension with this 基礎年金番号通知書 on your hand. Of course, if you already have a 年金手帳, you are supposed to keep it and use it for such procedures.
Let’s talk about pension benefit from the next week.
If the aggregated number of months of your insurance premium payment through the companies you worked in Japan exceeds 120, you are entitled to receive Employees’ Pension（厚生年金）when you turn 65 years old. Then, what if you quit your company and return to your mother country before you pay off the minimum 120 months of insurance premium? Would you see no benefit at all? Yes, there is a benefit called 脱退一時金 a lumpsum payment upon withdrawal. If you meet the following criteria, you will be given this lumpsum payment:
l You do not have Japanese nationality.
l You do not belong to any of the public pension systems.
l You have paid at least 6 months of Employees’ Pension insurance premium.
l You have moved your address to outside Japan.
l You claim this lumpsum payment within two years since you withdraw your Employee Pension insurance.
The actual amount of your lumpsum payment upon withdrawal is calculated by the following equation:
Your averaged monthly salary including prorated bonus x coefficient(*1)
(*1) The following table shows the actual coefficients:
Number of months you paid insurance premium Coefficient
From 6 months to 11 months 0.5
From 12 months to 17 months 1.1
From 18 months to 23 months 1.6
From 24 months to 29 months 2.2
From 30 months to 35 months 2.7
From 36 months to 41 months 3.3
From 42 months to 47 months 3.8
From 48 months to 53 months 4.4
From 54 months to 59 months 4.9
60 months or more 5.5
Then, I would like to explain how your Employees’ Pension will treat your spouse who lives with you in Japan. When you are hired by a Japanese company, you are requested to inform your company of your family status (dependents, namely your spouse and children). If your spouse does not work or its annual income is 1.3 million yen or below, she or he is automatically covered by the National Pension System without paying additional insurance premium. If you are single, and later you get married, it is the same thing. If you quit your job and start up your own business or you turn 65 years old, or if your spouse earns more than 1.3 million a year, or you two divorce, your spouse has to begin to pay monthly insurance premium to continue the pension status up to the age 65 when she or he will be entitled to receiving the pension.
If you die while you work or you are receiving pension payment, and if your spouse is not 65 years old yet, she or he is given Surviving Family Pension up until your spouse turns 65 years old when she or he will be paid the national pension in full amount. Your children could be entitled to Surviving Family Pension for a certain period of time if your spouse is not available.
Children and Childcare Tax（子ども・子育て拠出金）
Unlike the National Health Insurance premium and the Employees’ Pension premium that you as employee and your employer share on a 50:50 basis, you do not have to bear this Children and Childcare Tax at all while your employer bears it 100%.
Your company pays your Children and Childcare Tax to a local pension office in the amount of a 3.6% of your monthly salary and of your semi-annual bonuses.
This tax revenue is intended to pay for the cost of various kinds of national projects to support and facilitate parents having small children in terms of early age education, babysitting and childcare services.
In Japan, mothers used to quit their job when they had a baby, and stay at home to take care of their children until when their children become able to stay home alone.
Some of those mothers wanted to go back to work early, but couldn’t make it due to the lack of local nursery school or babysitting services.
Facing the declination of working population in Japan, the government made this tax to increase the supply of childcare services to facilitate those who have small children but wish to work to go back to their original jobs.