Will Japan ask for 10 years’ back enrollment on Kokumin Nenkin?

I want to point out an interesting article that commenter Chuckers shared with me yesterday, link here.

The gist of it is that the Labor and Health Ministry wants to allow people to pay nenkin premiums that are up to 10 years in arrears (haven’t paid since 2000 or 2001, or missing payments in that time.)

There is some confusion, but it looks like the rule still is that you can pay up to 2 years in arrears. My nenkin coupons for 2010 don’t suggest that, so I can’t say with 100% certainty.

The proposal is to allow people to pay up to 10 years in arrears, except you would be charged interest for any payments that were due earlier than 2 years ago. This is fair, because you had, in finance terms, “use of the money” in the meantime. And, actuarially, you got to see for 10 years if you would still be around in this time to have a pension even matter.

What I wonder, though, is that if there is the ability to pay for any gaps in 10 years of coverage, if the policy won’t be that the government can ask for the unpaid contributions for any time of those 10 years. Since people were supposed to be in the thing, it’s only fair the government ask people to pony up.

If I understand the article (in Japanese), it’s a challenge for many Japanese to make the 25 years to vest in a pension. “Vest” would be to be eligible for a pension.

I hadn’t realized it until I read the piece, that I actually was entitled to a Japanese pension much sooner than most Japanese of my age at the time. I came here at 40, and had paid into U.S. social security for 24 years, since the age of 15 with a gap year or two. So upon paying into kokumin nenkin, I also had the totalized 25 years by the U.S.-Japan Social Security Socialization Treaty. I was entitled to about 136 yen a month at retirement for every coupon payment I made.

The Japanese system begins at age 20. Since a Japanese at age 40 would not have the 25 years in the Japanese program, I actually “vested” before practically every one of my age here. Even though my Japanese pension would be very small.

The concern of the Labor and Health Ministry is that many Japanese do not make the 25-year mark for vesting. There really should be some minimum annual coverage, like in America (about $4,500 annual earnings), that allows people to count that year toward a vesting.

Easily, then, many people would make the 25 years.

5 thoughts on “Will Japan ask for 10 years’ back enrollment on Kokumin Nenkin?

  1. I think there is a small safety net for vesting as well as a minimum annual coverage of sorts:

    http://www.nenkin.go.jp/main/individual_01/index5.html

    I won’t pretend I understand all of what is written there but I think I get the general gist of it.

    If you are making income well below the poverty line and actually apply and prove that you are, you can be exempted from having to make payments (in full or partial payments.) However, you are still counted as being in the system. You DO have to apply for this. If you don’t, it is counted as a non payment and you won’t end up vested. I think it also says that the government will shoulder the burden you are expected to be paying up to half during the period you have been granted an exemption.

    It also looks that if you are taking a reduction in payments, you are allowed to back fill them up to 10 years previous if you are suddenly flush for whatever reason. You will have to pay interest on back filling the payments that are older than 2 years.

    1. I knew about this one, Chuckers. If people certify to having been in a low income bracket, at around 780,000 yen, 1,180,000 yen and 1.580,000 yen, the government says they don’t have pay the full coupon. Rather, just pay 1/4, 1/2, or 3/4, and take a benefit the is reduced. (I don’t think it’s proportionately reduced.)

      This helps solve the problem a bit, but it looks like it was designed by people who really didn’t want low income earners to ever vest. (Making 45,300 yen contribution on a 780,000 yen income, for example.)

      In America, the first $4,480 of earned income is taxed at 6.2% (so $277.76). No matter when it’s earned in the year, it counts as 4 quarters (now I think these are called “credits”) or an entire year. Having 40 credits makes the 10 years, and the contributor/taxpayer is vested in social security.

      So they’re vesting for under $3,000 in the ten years. The benefit on that amount would be pathetically small, but there would be a benefit.

      In Japan, it looks like people don’t ordinarily vest until they’ve contributed 4,530,000 yen (starting from this year’s 15,100 yen coupon). So you pay about $48,191 (94 yen/USD) before you qualify for anything.

      Fine if the people want a longer-term vesting. But to qualify for a “year” in the system, the hurdle should fairly be pathetically low.

      I know in Canada, and I think too in Australia, the qualification for the basic pension is one year for every year you simply exist (so $0 contribution). Maybe ten years to vest. But ideally if you want to see any size check, you have to reside there for decades (Canada), or show up with about 10 years to go on your career (Australia).

  2. Also, it looks like the proposal is to make the 10 years’ back enrollment voluntary. This means, it gives a chance for people who, for whatever reason, did or could not pay in, to pay in.

    As I have been posting about this a bit on the net, it’s attention grabbing to realize that for some people, the issue about pensions is that they are older and really want the chance to go back and pay in to get the 25 years.

    So many people who complain are younger and suggest that the pension isn’t “worth it”. Once someone gets up in years, the value becomes more apparent.

  3. A rather “interesting” thing that may be significant of nothing but thought you might find interesting (and probably worthy of breaking out into its own post.)

    Today, I received in the mail the form to fill out for the child stipend the government out from my local ward office (Setagaya.)

    In addition my bank details so they know where to send the money, they also want to know what health plan (government sponsored, ward sponsored, coop sponsored etc.) as well as what time of pension service I am using (salaryman pension, kokumin nenkin, teacher’s pension, civil servant pension etc.)

    At first, I thought that this might be just for statistics calculations etc but on closer inspection, they are actually asking for my pension number on the form (which I am going to have to go dig out.)

    I don’t know what the form looks like for other wards/prefectures but I wouldn’t be surprised if they were all fairly similar. I also don’t know what they would do if you didn’t fill out the information. Probably call you up and say your form isn’t complete and they won’t hand out the money if you don’t complete it. Although looking even closer, there is a category of “Not enrolled” as a choice for the type of pension, so maybe it is just for statistics purposes.

    Out of curiosity, I will try to remember to ask them on Monday why this info is needed as I need to call to find out whether I can get by with signing the form instead of stamping it.

    1. Chuckers, it’s consistent with a pattern I hear from many people, that the local governments have been much more interested in people’s social insurance status over the past couple months.

      If someone is putting a question down on a form, it means someone else is making a list. So it may be for statistical purposes and/or it may be to get people enrolled in the correct insurances.

      This is what made the Free Choicers’ victory lap so silly. The fact is, people are supposed to be in these things. So the kid gloves approach that the administrators are taking to these matters is really quite a favor.

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