Ultimate Guide To The Japan Pension System

By Joan Anderson and Roungnak Praem | March 29, 2021 

This is not a topic people like to talk about... but if you are going to live and work in Japan, you should know what the Japan pension is and what it contains. After all, you are paying for it each month. In this guide, you will learn about the two kinds of pensions Japan has, which category you will fall in as a worker in Japan, how you can receive your pension if you are old enough, and how you can receive a lump-sum when leaving Japan earlier.

The information you obtain on this site is not, nor is it intended to be, legal advice. If in doubt or faced with confusion you should always consult an expert or attorney for individual advice regarding your own circumstances.

This article on the Japan Pension System is a part of our series on Life in Tokyo. Be sure to check out more articles in our series to help you out with various topics around Japan!

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    Japan Pension

    Japan Pension System

    In Japan Nenkin (Japanese for pension) is something in which everyone aged between 20 to 59 years is required to pay a monthly contribution. The contributions go into a fund that is managed by the Japanese Pension Service, which is a government organization that is run by the Ministry of Health, Labor, and Welfare. How much you need to pay depends on  the category you fall under, as there are two types in the Japanese pension system. You have the Kokumin Nenkin (国民年金) which stands for the National Pension plan and as the second you have the Kosei Nenkin (厚生年金) which stands for Employee’s Pension Insurance Plan. There are a total of three categories that a person can fall under and we will list them below.

    Category I insured persons: 

    Category I are registered residents of Japan aged 20 to 59 years and are self-employed persons and others. What are others you might ask? People working in agriculture, forestry, or business operators, but students also fall under this category. Yes, even students have to pay for their pensions starting from age 20. Although if you are a student this will not be easily done because you are studying instead of working. Luckily students can ask for a postponement of their monthly contributions until they graduate. To become a category 1 insured person you will need to register yourself at your Municipal Office within 14 days by submitting the Application to Enroll in the National Pension as Category I Insured Person.

    Category II Insured persons: 

    Category II is the salaried workers of private sectors and government employees. People in this category are your typical people who work full-time but people that work 75% of full-time are also in this category. Becoming a category II  is automatically done by your employer; they will need to enroll you in the Employees’ Pension Insurance or the Mutual Aid Associations. No extra steps need to be taken.  

    Category III insured persons:

    Lastly, you have the category III insured persons. These are people aged 20 to 59 years old, who are dependent on people that fall under category II Insured persons. Again, your spouse’s employer needs to enroll you in the Japan Pension Service Branch Office by submitting the Application to Enroll in National Pension as Category III Insured Persons.

    The National Pension Plan only requires a monthly contribution of ¥16,540. The Employee’s Pension Insurance Plan is a bit different. All full-time workers or workers that work 75% of full-time have to pay the Employee's Pension Insurance Plan as well as the National Pension Plan. The Employee’s Pension Insurance Plan will be taken automatically from your monthly payment and is 18.3% of your salary, but fear not the contribution is split 50/50 between the worker and the employer, so the actual deduction that you will pay is 9.15% Only Category III persons have to contribute to both pensions and category I and II only need to contribute to the National Pension Plan! 

    Just a quick recap:

    The National Pension Plan (Kokumin Nenkin) is applicable for people belonging in categories I and III, which is a monthly contribution of  ¥16,540.

    The Employee’s Pension Insurance Plan (Kosei Nenkin) is applicable for people belonging in category II, which is a monthly deduction of 9.15% from your salary. 

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    Japan Pension Benefits

    Moving along, we will be discussing the benefits of Japan’s Pension. You can receive the Old-age Basic Pension at the age of 65 if you enroll under the National Pension and Employees' Pension Insurance systems. To be qualified, your total coverage periods need to be ten years or more. After regularly paying out for the premium, here are the overall benefits that you can gain from paying out the insurance. By the time you have been fully contributing towards the pension for 40 years, you will be able to get ¥781,700 per year. Still, depending on your income and the National Pension Act’s law, you might be granted a full amount or partial amount of contribution payment. It works for both Japanese and non-Japanese residents.

     If you live overseas, you can apply from your home country’s social security office or wherever you decide to retire. You can start receiving your pension early (from age 60), but we do not recommend doing that until you are 65 as early payments will reduce the benefit payments by 0.5% for each month you take early. This means your pension will be reduced by 30% if you take it at 60 years old, but only 24% if you take it at age 61 and so on until you reach 65, after which there will be no reductions. Note for those who are planning to opt out; you may lose all coverage while staying in Japan, foreigners will also be excluded from the lump-sum withdrawal payments. In a way, if your home country is inside the social security agreement, your pension benefits might be affected.

     Moreover, the Japanese government has been taking this issue seriously in the past few years by sending reminders and a final demand letter. If you still choose to neglect it, the government has the right to seize your assets to compensate for the unpaid contribution amount. The current law states that anyone with an annual household income of more than three million yen and has not paid a contribution towards Japan Pension for more than 13 months is subject to asset seizure. If you are currently having financial difficulties paying for the pension, please be sure to always contact your municipal Pension Office. Here’s what we suggest; if you are planning to stay as a resident in Japan for below five years, you might as well just use your country’s insurance. However, if you plan to stay longer than five years in Japan, it is better to use Japan’s insurance. If you are a student, you can apply for the exemption that began when you landed in Japan to the end of the pension year. 

    The pension year varies depending on your institution type. If you are enrolled in a university, the calendar period is April to March. For other institutions such as language schools, it starts from July to June of the following year. By the time you have finished your studies, you could apply for the lump-sum withdrawal payment if your public pension coverage period is six months or longer. 

    However, suppose you are planning to work in Japan. In that case, you need to make sure that your employer is responsible for enrolling you in the social insurance system: employees’ pension insurance or mutual aid associations. If you are planning to stay as a university student and cannot afford to pay for the pension, please always apply for the exemption every year.

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    Penalty For Not Paying The Japan Pension

    The Japanese government has not really been giving out penalties for not paying your monthly contributions but as mentioned before they are changing and actively pursuing people now. They will send you three letters with the last one being the final warning. After the third letter, they will seize your bank accounts. If for some reason you have not paid the monthly contributions to your pension for years and they do finally get to you, you will need to pay up to two years. You can set up a payment plan if you are not able to pay this in one lump-sum. The maximum is two years so this would be an amount of almost ¥400,000 There is no benefit of not paying your pension contributions monthly as it only creates more problems if you do not pay. Please pay it for your future as the less you pay the less you will receive later on.

    How to Receive Your Japan Pension

    As stated before you must be 65 years old before you can receive your full Japanese pension each month. It does not matter if you are still residing in Japan because the Japanese pension can be paid and received anywhere in the world. You also need to have contributed more than 10 years to the Japanese pension. When you reach the age of 65 years you need to go to your local Japanese pension service office where you will need to apply for your pension.  There you will need to fill in a form which is called the Claim for National pension/ Employees’ Pension Insurance form. 

    Workers that have contributed to the Kosei Nenkin will receive around 50% of their wage that they earned while still working. If you were earning ¥250,000  per month you would receive a monthly pension of ¥125,000  each month.

    People that were contributing monthly to the Kokumin Nenkin (National pension) will receive ¥787,700 each year for their pension. This is ¥65,141  a month which is not a lot compared to the Kosei Nenkin, because they contributed less for the past 40 years into their pension compared to a worker contributing to the Kosei Nenkin.

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    Japan Pension

    Lump-Sum Japan Pension

    So you have thought about it and do not want to spend the rest of your life in Japan? Do not worry about missing out on your pension. If you are not contributing for 10 years the Japanese government has an option to withdraw up to five years of your pension contributions as a lump-sum. If you have contributed more than six months to the Japan pension system you are eligible for the lump-sum pension. There are two options you can choose from.


    There are 20 countries that Japan has an agreement with, these countries are Germany, United Kingdom, Republic of Korea, United States, Belgium, France, Canada, Australia, Netherlands, Czech Republic, Spain, Ireland, Brazil, Switzerland, Hungary, India, Luxembourg, Philippines, Slovak Republic, China. If you are a citizen from one of these countries you can add the time that you have contributed to the Japan pension system to that of your own country that is listed above. If you are interested in this option you should contact your consulate and talk with them as they will know more about what to do.

    Lump-Sum Payments

    If you do not want to make use of the totalization option or if your country does not have an agreement with Japan, your other option would be a lump-sum payment. You can recover up to five years of your pension payments in one lump sum after leaving Japan permanently. If you use this option, you will lose your right to claim pension coverage in the future if you do decide to come back to Japan. Taking this option is what most foreigners do when leaving Japan. Do note that you will only receive 80% of the whole amount because 20% of the sum is subjected to tax. You can go through another process to get that 20% which we will explain how to do so.

    Do You Qualify for a Lump-Sum Payment?

    Before you can apply you need to be eligible by meeting certain conditions.

    • You must not possess Japanese citizenship.
    • Having paid monthly contributions for six months or more.
    • You need to apply for this payment within two years of leaving Japan.
    • Never been qualified for Japan pension benefits.
    • Not having a place of residence anymore in Japan.

    If you meet all of these following conditions you can apply for the Lump-Sum Payments.

    Necessary Documents for the Japan Pension

    When you do meet these conditions here are the necessary documents that you will need when applying. 

    A photocopy of your passport

    The pages you should copy need to show this information:

    • Date of your final departure from Japan
    • Your name
    • Date of birth
    • Nationality
    • Signature
    • Resident status

    Bank Documents 

    The documents should include

    • Name of the Bank
    • Name and address of the bank branch
    • Your account number
    • Information to show that you are the owner of the account.
    • IBAN or SWIFT/BIC code

    Copy of a document that shows your Basic Pension Number ( 基礎年金番号)

    Lastly, a copy of a deleted residence record (:除票 ) or a document that shows your Resident Register code.

    Before You Leave Japan

    You will need to submit a moving-out notification (転出届) to your local municipal office. This should be about two weeks before you intend to leave Japan.

    You will also ask for a residence certificate (住民票抄本) with Resident Register Code (住民票コード)

    After You Leave Japan

    Download and fill out this form on page 13 and also include all the necessary documents that we stated above. The form is written in English, you should not worry if your Japanese is not that good. 

    After you filled in everything and included the documents you should airmail it to the address that is provided on the form.

    Now you wait, this process can take up to six months before you receive your payments. After receiving 80% of the Lump-Sum you will also get a Notification of Lump-Sum Withdrawal Payment Confirmation”( 脱退一時金支給決定通知書) sent to your home address, keep this form as you will need it if you want to reclaim the other 20% of your lump-sum.

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    Japan Pension

    Claiming The 20% Tax Refund

    As stated they will only pay you 80% and the 20% is paid as tax, but you can still go through a process to receive this 20% tax cut.

    Before you leave Japan

    Before you leave Japan you should find someone you trust and that someone should also be able to speak and read Japanese; they will be your tax representative. Your tax representative will be the one to visit the Tax Office in Japan on behalf of your name, so it should really be someone you trust or you can also consider hiring professional help. It should also be noted that it is not guaranteed that you will receive the remaining 20%. 

    Go to your local tax office or download the Nozei Kanrinin no Todokesho納税管理人の届け書 (Tax Representative Declaration Form) here. Fill out the forms two times with your Tax Representative and submit one of the forms to your local tax office and the other form needs to stay with your Tax Representative. 

    After You Leave Japan

    Send the ORIGINAL Lump-Sum Withdrawal Payment Confirmation Notice to the person you designated as your Tax Representative. They will need to go to your local Tax Office in Japan and file for the tax return (確定申告書). The Tax Representative will need to have the government deposit the remaining 20% into his Japanese bank account. The Japanese government pays out pensions worldwide but this is a tax write off so it can only be deposited in Japanese bank accounts. After your Tax Representative receives the remaining 20% they can transfer it from their own bank to yours. This is why you need to take someone you trust as your Tax Representative and they must be pretty fluent in Japanese too because this last process is in Japanese only.

    How much you will receive

    The lump-sum you will receive is different and depends from person to person. It is calculated using your average monthly income. The lump-sum payment is one month’s salary plus 10 percent for each year you live in Japan. When you are still a Japanese resident you will not be able to claim a lump-sum

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    Final Thoughts on The Japan Pension System

    I would suggest that you think about your future in Japan. If you are 100% sure that you are going to live for the rest of your life in Japan I would suggest you try and pay into the Employee’s Pension Insurance Plan as this pension is way better than the National Pension Plan. This means you will have a more comfortable retirement in Japan. You will also have a bigger Lump-Sum Payment if you leave after five years. The biggest problem is, staying in Japan between six to nine years then you are just losing out on money and a better pension. It is for you to decide if you will stay here long term (longer than 10 years) or short term(less than 6 years).

    If you eventually do decide to leave Japan for good, find out if your home country is on the list of agreements that Japan has. This way you can transfer your pension contributions paid in Japan back to your national pension in your home country. Always pay for your monthly contribution as this would be seen as something good for your future. It might not be the greatest amount of money but it is better than receiving nothing for your pension. 

    And whatever you do, do not take your pension at the age of 60 years old as you will lose a ton of money doing this!

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