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Japanese Pension System: Top 10-Point Guide for Expats

Japanese pension system might initially appear overwhelming, particularly for expats experiencing a new culture and customs. However, gaining a thorough understanding of this vital financial system is crucial for planning a secure and comfortable retirement.

This comprehensive guide aims to demystify the Japanese pension system for you, offering practical insights and information to empower you on your financial journey.

If you want to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).

This article is online for informational purposes only, and the facts might have changed since we wrote it.

You should always speak directly to government departments to get updated information.

Introduction to the Japanese Pension System

The Japanese pension system serves a critical function, safeguarding the financial security of Japan’s elderly population. As an expat living and working in Japan, understanding this intricate system is crucial for your financial future. The pension system, along with health insurance and unemployment insurance, forms the bedrock of Japan’s social security system.

This system consists of multiple parts, each designed to ensure individuals have a stable income during their retirement years. This is crucial in a country like Japan, which boasts one of the world’s longest life expectancies. Therefore, having a reliable pension system becomes not just a luxury but a necessity. The Japanese pension system is considered a defined benefit system, meaning the benefits are determined by a formula based on the individual’s earnings history, tenure of service, and age.

The Structure of the Japanese Pension System

The Japanese pension system operates predominantly through three distinct plans: the Kosei Nenkin (Employee’s Pension Insurance), the Kokumin Nenkin (National Pension System), and the Kyosai Nenkin (Mutual Aid Pension Plan). Each of these plans is designed to cater to different demographic groups within Japan’s diverse population.

Kosei Nenkin

The Kosei Nenkin primarily covers employees working in the private sector. It works in collaboration with employers who share the burden of pension contributions with the employees, thereby ensuring that the employees have a steady pension income upon retirement.

Kokumin Nenkin

On the other hand, the Kokumin Nenkin is designed for self-employed individuals, unemployed people, and part-time workers who may not have access to the Employee’s Pension Insurance. It provides a basic pension to all residents of Japan, regardless of their employment status, provided they have paid into the system for a minimum qualifying period.

Kyosai Nenkin

The Kyosai Nenkin serves public sector employees, ensuring that public servants and other government employees have access to pension benefits upon retirement. The Japan Pension Service, the primary administrative body overseeing these pension plans, manages these diverse pension schemes, providing detailed information, handling contributions, and dispensing pension benefits.

Japanese pension system

Contributions to the Japanese pension system vary depending on your income and employment status.

Eligibility Criteria for Expats

When it comes to the Japanese pension system, expats need to be acutely aware of the eligibility criteria. Generally, any resident of Japan, aged between 20 and 60, is obligated to enroll in one of the pension systems. This holds true regardless of your nationality or employment status.

For instance, even if you’re an expat who is self-employed or not employed, you still need to join the National Pension (Kokumin Nenkin). Similarly, expat employees of companies are typically required to join the Employees’ Pension Insurance (Kosei Nenkin). Understanding these criteria is vital to ensure that you meet your obligations and can benefit from the pension system when the time comes.

Contribution Rates and Payment Methods

Contributions to the Japanese pension system vary depending on your income and employment status. For salaried workers under the Kosei Nenkin, the current contribution rate is around 18.3% of the monthly salary. This amount is shared equally between the employer and the employee.

In contrast, individuals under the Kokumin Nenkin pay a flat-rate premium. As of 2021, this flat-rate was set at 16,540 yen per month, but rates may have changed in the years since. It’s important to check the current rates with the Japan Pension Service or your employer.

These contributions can be paid through various methods, such as automatic bank transfers or even at convenience stores. For many expats, the most convenient option may be to arrange for automatic withdrawals from their bank accounts.

Age of Pension Benefits Commencement

Typically, you can begin receiving your pension benefits from the Japanese pension system at the age of 65. However, the system offers a degree of flexibility. You can choose ‘early’ or ‘delayed’ pension commencement. Early pension commencement can start from the age of 60, but with reduced monthly payments. Conversely, if you choose to delay receiving the pension until after you turn 65, your monthly payments will be increased.

Calculation of Pension Benefits

The amount of pension benefits you receive from the Japanese pension system is calculated based on your average standard monthly remuneration and the number of months you’ve paid into the system. There are certain factors that can affect the amount of pension you receive, including the age at which you start receiving the pension and your total years of contribution.

How to Claim Your Pension Benefits

To claim your pension benefits from the Japanese pension system, you must apply to the Japan Pension Service. This process involves filling out an application form and submitting it along with necessary documentation, including your pension book, bank account details, and personal identification.

The “Lump-sum Withdrawal Payments” system for Expats

One unique feature of the Japanese pension system tailored for expatriates is the Lump-sum Withdrawal Payments system. This system provides an opportunity for expats who have contributed to the pension system but have decided to leave Japan permanently to receive a lump-sum amount rather than waiting for pension payments.

To be eligible for this benefit, expats must meet a set of conditions. Firstly, you must have contributed to the pension system for at least six months. You should be aware that this time period excludes any period of coverage in a foreign country under a Social Security Agreement. Secondly, you must be departing from Japan with no intent to return.

Finally, you must submit the application for Lump-sum Withdrawal Payments within two years of leaving Japan. This period begins from the day of your departure. If you fail to submit the application within this timeframe, you will be ineligible for the Lump-sum Withdrawal Payments.

It’s essential to remember that the Lump-sum Withdrawal Payments system is not an automatic benefit. You must actively apply for it.

Japanese pension system

For expats in Japan, understanding your employer’s role can give you a better understanding of the process and give you peace of mind knowing your pension is being appropriately managed.

The Role of Employers in the Japanese Pension System

When understanding the Japanese pension system, the role of employers is crucial, especially when contributing to the Employee’s Pension Insurance (Kosei Nenkin). Employers play an active part in managing pension contributions for their employees. They deduct the employee’s share of the pension contributions directly from their salaries and combine it with their share before making a single consolidated payment to the Japan Pension Service.

The role of the employer differs slightly depending on the size of the company. Large companies typically have a human resources department that manages pension contributions. For smaller companies and start-ups, the business owner may handle these responsibilities. It is essential for expats to have an open conversation with their employers or HR departments about how their pension contributions are managed.

For expats in Japan, understanding your employer’s role can give you a better understanding of the process and give you peace of mind knowing your pension is being appropriately managed.

Tax Implications of Japanese Pension System 

The Japanese pension system, like any other financial system, has its tax implications. Expats contributing to the pension system need to be aware of these to avoid surprises at tax time.

The contributions you make to the Japanese pension system are generally tax-deductible. This means that the amount you pay towards your pension is deducted from your taxable income, potentially reducing your overall tax liability. However, it’s essential to consult with a tax professional or the Japan Pension Service to understand exactly how this works and how it may impact your tax return.

On the other side of the coin, pension benefits are considered taxable income in Japan. When you start receiving your pension benefits, you may be required to declare this income on your tax return.

Impact of Career Changes on Your Pension

Career changes can have a significant impact on your pension in the Japanese pension system. This applies whether you’re changing jobs within Japan or leaving the country and later returning.

If you change jobs within Japan, your new employer will typically handle the transfer of your pension account. They will ensure your contributions continue seamlessly, provided that your new job also falls under the Employees’ Pension Insurance (Kosei Nenkin).

For those leaving Japan with plans to return, you can apply for a refund through the Lump-sum Withdrawal Payments system, as discussed earlier. However, when you return to Japan and rejoin the workforce, you’ll need to re-enroll in the appropriate pension system and start your contributions afresh.

It’s crucial to understand these impacts and plan accordingly to ensure your pension contributions are managed effectively throughout your career transitions.

Special Provisions for Spouses in the Japanese Pension System

The Japanese pension system includes several special provisions for spouses, designed to provide financial support and stability. These include the Spouse Allowance System and the Widow/Widower’s Pension.

Under the Spouse Allowance System, a spouse who doesn’t work or earns below a certain income threshold is eligible for pension benefits when the working spouse reaches retirement age. This is crucial for families where one spouse has chosen to stay home or works part-time.

The Widow/Widower’s Pension is designed to provide financial support to a spouse in the event of their partner’s death. The surviving spouse is eligible to receive a portion of the deceased’s pension, providing critical financial security during a challenging time.

Understanding these special provisions can help you and your spouse plan for your future, ensuring that both of you will be provided for under the Japanese pension system.

International Social Security Agreements

The Japanese government has established International Social Security Agreements with numerous countries. These agreements protect the rights of international workers by preventing the imposition of double pension coverage.

If you are an expatriate working temporarily in Japan and your home country has a Social Security Agreement with Japan, you may be exempt from contributing to the Japanese pension system. Instead, you may continue making pension contributions in your home country while you work in Japan.

To benefit from a Social Security Agreement, you need to obtain a certificate of coverage from the social security authority of your home country and submit it to the Japan Pension Service. This certificate will serve as proof of your coverage under your home country’s social security system, and will exempt you from making pension contributions in Japan.

Remember, these agreements are reciprocal, meaning that they also benefit Japanese nationals working temporarily in other countries.

Japanese pension system

Japan is currently grappling with the challenges posed by a rapidly aging population.

Future Trends and Reforms in the Japanese Pension System

The Japanese pension system, like all dynamic social systems, evolves over time. This evolution is shaped by a host of factors, including Japan’s changing demographic landscape, economic situation, international commitments, and domestic policy debates.

Japan is currently grappling with the challenges posed by a rapidly aging population. As the proportion of older people increases relative to the working-age population, it exerts greater pressure on the pension system. In response to this demographic challenge, there have been ongoing discussions about potential reforms.

Some of these proposed reforms include increasing the retirement age, adjusting contribution rates, and making structural changes to how pensions are calculated and disbursed. As these changes are implemented, they may significantly affect how expats interact with the Japanese pension system.

If you’re an expat living in Japan, it’s important to keep up with these changes. Actively engage with available resources, consult with financial advisors or human resources personnel, and stay abreast of policy updates from the Japan Pension Service. By taking these proactive steps, you can ensure that you navigate the Japanese pension system effectively, securing your financial future in your retirement years.


As we wrap up this exploration of the Japanese pension system, it’s important to remember that staying informed and proactive is the key to successfully navigating this system. Like any bureaucratic structure, the pension system in Japan can seem complex and intimidating, but with the right information, it’s a manageable and integral part of your life in Japan.

Remember, while this guide serves as a comprehensive introduction, it’s crucial to consult with professionals or advisors for personalized advice tailored to your specific circumstances. The Japanese pension system is continually evolving, and staying updated with these changes ensures your financial security in your golden years.

Moving to a new country, adjusting to a new culture, and understanding complex systems like pensions can be challenging, but you’re not alone.

Millions of expats have walked this path before, and with the right information and a little patience, you can secure your financial future in Japan. Remember, every contribution you make towards the Japanese pension system is a step towards a secure and comfortable retirement.

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

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