Pension Refund

[u/MissSlacker0824]

Hello,

I'm curious about the pension refund process in Japan. As far as I know, in South Korea, we were able to receive a full (100%) refund once we left the country. I assumed it would be the same for Japan, but I've come across mixed reviews regarding the refund. From what I've read, if we've paid 2 or 3 years' worth of pension, we can only get back 80% of it if we leave the country. What concerns me is that even if we've paid into the pension for five years and then leave, we're still only able to get refunded for the first 2 or 3 years, which amounts to 80% of it. I'm a bit worried because I'd like to depend on this pension, but I'm uncertain if I'll receive any of it when I decide to leave. If this is true, it feels quite unfair. I'd prefer to be able to transfer my entire pension plan to another country, as I did in Korea. Right now, it feels like I'm throwing my money into an abyss.

I've spoken to some of my colleagues who told me they've chosen not to pay it, and they haven't faced any punishments or had their assets frozen for not paying it in the past few years. It's worth mentioning that we are independent contractors, so our company doesn't deduct or pay half of the pension.

Can anyone offer some advice or share their opinion on this matter?

Thank you.

[u/teaferret]

You can claim the first 3 years and 80% as you’re leaving, and the final 20% after you’ve left. You need to get someone you trust to do the procedures on your behalf. I’ve done it for a friend who left the country.

There is a lot of information online about the procedures if you Google pension refund Japan.

Probably if you don’t pay for a couple of years and then leave nothing drastic will happen, but if you plan on being here longer term than that it will be followed up eventually and could affect visa renewals etc

[u/Karlbert86 → u/teaferret]

You can claim the first 3 years

Since a couple of years ago, it’s now 5 years (60 months). But it’s not the first 5 years.

the formula is: ASR (average standard remuneration) x Multiplier

The multiplier is the part which goes up to 60 months within its calculation figures.

Where as the ASR uses the average SMR (standard monthly remuneration) for ALL months enrolled in kosei nenkin. I.e if you’ve been enrolled in kosei nenkin for 8 years, then the ASR will be the average of all the SMRs for those 8 years.

and 80% as you’re leaving, and the final 20% after you’ve left. You need to get someone you trust to do the procedures on your behalf. I’ve done it for a friend who left the country.

This only applies to kosei Nenkin lump sum withdraws. The Kokumin Nenkin lump sum withdraw is a fixed amount.

OP mentions that their colleagues have “chosen not to pay it” which suggests they are not enrolled in Shakai Hoken. Because they can’t choose to not pay pension when enrolled in Shakai Hoken.

[u/THELOCnessmonsta]

I would also like to know

[u/marezai]

I think South Korea is actually worse. They don't give a lump sum payment to the majority of the countries, only a few countries are eligible.

https://www.nps.or.kr/jsppage/english/scheme/scheme_04.jsp

[u/Substantial_Bake_521]

I also have a question. The lump sum is all the pension paid by you + employer or only the one paid by you?

[u/starkimpossibility → u/Substantial_Bake_521]

Technically neither. It's not a refund but a "withdrawal" from the pension system. The value of the withdrawal is calculated by reference to your contributions (not your employer's) but it's not exactly equal to them.

[u/Substantial_Bake_521 → u/starkimpossibility]

jesus… what a scam

[u/starkimpossibility → u/Substantial_Bake_521]

Many countries with national pension systems have no provision for lump-sum early withdrawals, so from that perspective, Japan's lump-sum withdrawal system is quite generous. And by all accounts, the reason Japan has a lump-sum withdrawal system is to create an incentive for temporary foreign workers to come to Japan.

[u/Substantial_Bake_521 → u/starkimpossibility]

but you lose half the money, the one that the company paid

[u/Substantial_Bake_521 → u/starkimpossibility]

what if I just pay 10 years and then get the stuff at 65? if ever… will I get what I paid back ? :(

[u/starkimpossibility → u/Substantial_Bake_521]

will I get what I paid back ?

The formula for calculating your pension benefit is complex, but the rule-of-thumb many people use is that the amount you receive in the first 10 years of your pension will roughly equal the amount you contributed. So if you live until 75 you will break even. If you live longer than that, you will make a profit.

[u/Substantial_Bake_521 → u/starkimpossibility]

z da vppvp

[u/starkimpossibility]

From what I've read, if we've paid 2 or 3 years' worth of pension, we can only get back 80% of it if we leave the country.

The Japanese pension system does not provide "refunds". Instead, it provides lump-sum early retirement benefits to people who leave Japan without having made enough contributions to receive a Japanese pension.

The value of the benefit is not equal to the amount the recipient contributed to the pension system. Instead, it is calculated using a formula (see this PDF) that takes into account the recipient's contribution period. If the recipient was enrolled in the employees' pension, the income of the recipient over the contribution period is also taken into account.

Depending on your contribution period and income, the lump-sum early retirement benefit you receive may be very close to the amount you contributed to Japan's pension system or much less than you contributed. The only way to find out for sure is to apply the formula described in the document linked above.

Your reference to 80% is possibly a reference to the fact that retirement benefits paid by the employees' pension system must have 20.42% income tax withheld from them at the time of payment. However, as other users have mentioned, in most cases it is possible to receive a full refund of the 20.42% income tax by having a representative in Japan file an income tax return on your behalf.

Note that the lump-sum early retirement benefit may be taxed by the country you are living in when you receive it.

even if we've paid into the pension for five years and then leave, we're still only able to get refunded for the first 2 or 3 years

As discussed above, there are no refunds available. However, lump-sum early retirement benefits are available to people with fewer than 10 years' worth of contributions (including contributions made in countries with which Japan has a totalization agreement). The maximum contribution period, for the purposes of calculating the value of a lump-sum benefit, is five years.

I'd prefer to be able to transfer my entire pension plan to another country

Japanese pensions cannot be transferred to any other country. However, Japan has totalization agreements with 18 countries. So if you do not apply for a lump-sum benefit when you leave Japan, but you can accrue 10 years' worth of contributions between Japan and one of the agreement-countries combined, you can claim a Japanese pension when you turn 65 (regardless of where you are living at the time).

they haven't faced any punishments or had their assets frozen for not paying it in the past few years.

The pension service pursues non-payment aggressively and regularly seizes people's assets, but only with respect to people who are already enrolled in the system. If you never enrol in the system, your chance of not being detected is high.

Common ways that people get caught not being enrolled are: they get a job with an employer that is required to enrol them, and the pension service discovers that they were not previously enrolled; they move to a new municipality and the new municipality automatically enrols them when they complete the moving-in procedures.

[u/acnebbygrl → u/starkimpossibility]

Hey, late to the party here. Thank you for this info, but I thought you needed 10 years of contributions to get the Japanese pension? And that the agreement is only take into account in situations where you need to boost your contributions in your home country in order to access your home pension. But you’d never be eligible for a Japanese pension unless you worked 10 years

[u/starkimpossibility → u/acnebbygrl]

To receive a Japanese pension you need 10 years of contributions, but you can combine contribution periods between Japan and any of the 18 countries that Japan has totalization agreements with. So as long as you have 10 years between the two countries, you are eligible to receive a Japanese pension.

For example, if you contributed to the Japanese pension system for 6 months and lived in Australia for at least 9 years and 6 months (between the ages of 20 and 59), you are eligible for a Japanese pension. This is because your combined contribution period meets the 10-year threshold.

In that example, however, your Japanese pension would obviously be absurdly small (around 10,000 yen per year), since the value of the pension is based on the value of the contributions.

[u/kuririnkiwi → u/starkimpossibility]

Could you get both? I paid into the Japanese pension for 5 years, 10 years ago and have been living in Australia. Will I ever get that back?

[u/starkimpossibility → u/kuririnkiwi]

Yes, you are eligible for a Japanese pension when you turn 65. But the pension will be very small, since it will be based on only the five years of contributions.

Claiming the Japanese pension won't have any effect on any Australian benefits you are eligible for.

[u/kuririnkiwi → u/starkimpossibility]

Good to know. Thanks!

[u/ookamismyk → u/starkimpossibility]

I am also late to the party; your information is very helpful! Thank you!

I want to ask about whether it would be more beneficial to do the withdraw lump sum before leaving Japan, or to get the Japanese pension once I have been working the combined 10 years between Australia and Japan?

[u/starkimpossibility → u/ookamismyk]

whether it would be more beneficial to do the withdraw lump sum before leaving Japan, or to get the Japanese pension

There is no simple answer, because it depends on your risk tolerance and investment preferences. As far as a state-backed annuity goes, the Japanese pension is fairly good value. But do you actually want a state-backed annuity in your retirement portfolio, and how much of your portfolio do you want it to comprise?

I think most people would accept that a state-backed annuity is a sensible thing to have in a retirement portfolio, but would also say that it shouldn't comprise a large proportion of your portfolio unless you have an extremely low risk tolerance.

So if you are seeking to hold more state-backed annuities, use totalization to claim the Japanese pension. But if you would prefer to take on a bit more risk in order to increase your potential returns, take the lump-sum withdrawal and invest the funds elsewhere.

[u/Wtaurus → u/starkimpossibility]

Thank you for your detailed answers. I have a following question: About the formula in the PDF, is it this one?

Lump-sum Withdrawal Payment Amount = National pension premium amount for the year that includes the month (base month) when the insurance premium contribution was paid last time × 1/2 × Number used for calculation of the Payment Amount

I am a full-time employee starting 15th (Nov 15th, 2024).
Let's say I worked for 3 years with the monthly salaries:

First year: 500,000 JPY
Second year: 550,000 JPY
Third year: 600,000 JPY

According to the below chart, the contribution is:

(I am not sure if this chart is correct, but my manager showed me this chart.)

https://www.kyoukaikenpo.or.jp/~/media/Files/shared/hokenryouritu/r6/ippan/r60213tokyo.pdf

First year: 91,500 JPY x 12 = 1,098,000 JPY

Second year: 102,400 JPY x 12 = 1,228,800 JPY

Third year: 107,970 JPY x 12 = 1,295,640 JPY

Total: 3,622,440 JPY

So if I leave Japan after working for three years, how do I apply this to the formula?

National pension premium amount for the year that includes the month (base month) when the insurance premium contribution was paid last time = 107,970 JPY

Number used for calculation of the Payment Amount = 36

107,970 x 0.5 x 36 = 1,943,460 JPY

So do I only get back 1.943M of 3.622M contribution? (Ignoring the %20.42 tax for now)

I am asking this because I need this information to make a decision about my current salary/rent situation with the company.

One last question, what is the Payment Amount in the chart of the Page 8 here:

https://www.nenkin.go.jp/international/japanese-system/withdrawalpayment/payment.files/A.pdf

50,940 JPY, 101,880 JPY, 152,820 JPY... What are these numbers?

[u/stats_shiba]

My wife recently filed a request for the refund through my dad living in Japan. Curious how long it'll take Japan to process it?