Japanese pension eligibility to go to 10 years (from 25), depending on consumption tax.

If I read this correctly:

 また、国民年金を受給するためには、納付済期間や免除期間等の合計が原則25年(300月)必要ですが、平成27年10月以降は、10年(120月)に短縮される予定です(この受給資格期間の短縮は、消費税の改正に合わせて、実施が予定されています)。

This is from the notice posted at the Japan Pension Service, describing the current program to allow certain people to backpay up to 120 months into the National Pension.

Ironically, if a change like this happens, it can impact Americans under totalization. This is because a 10-year vesting, Japanese National Pension may make the US social security recipient subject to Windfall Elimination Provision.

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2 comments

  1. Jack Nelson · March 16, 2013

    I realize you are no longer in Japan but you seem to know a lot about the Japanese pension system. Hopefully you can answer my question:

    We have 45 year old Canadian permanent resident in Japan who currently is on NHI but not on the National Pension Plan (eg. not registered in it… and not delinquent in dues etc.) – and nothing contributed into the Canadian system. One prior stint of having contributed to the Japanese National Pension Plan but got the one-time refund when he repatriated.

    Does it still make sense to register in the National Pension Plan?
    Will they demand two years of premiums (like NHI)? If so, it is important to know ahead of time – not at the time of inquiring/registering.
    It is difficult to properly envision what the pension payments might look like after registering in the system so late. And, from what age? 65? 70? 75?

    Any answers or advice – partial or otherwise – would be welcome and appreciated.

    Thank you!

    • hoofin · March 17, 2013

      Jack,

      There are actually a couple of considerations there.

      Canada’s retirement program is a three-legged stool: an old age, basic pension (OAS); a mandatory, covered-employment pension with a defined benefit formula (CPP); and a “401(k)” style contributory plan (RSPP).

      The OAS is based on residence in Canada, and the full benefit is about $700, earned 1/40th at a time during covered years. While the Canadian is not resident in Canada, he/she accrues no additional benefit in that program. Obviously, if there are no contributions into CPP and RSPP in that time, no benefit accrues there. There is also no vesting requirement in CPP and RSPP, but there is (10 years) with OAS. There is a separate vesting (20 years) for a Canadian to be able to receive OAS and live outside of Canada.

      Under the Canada-Japan totalization agreement, periods of coverage by Japan will count towards that OAS vesting, even though no additional benefit will accrue in OAS during that time. So, if someone needed the 10 years’ vesting, OR the 20 years’ vesting to be eligible to be paid outside of Canada, then that individual would want to be with the Japanese program (as is ordinarily required anyway if someone is resident in Japan!)

      Second, there is talk of Japan reducing its own vesting period to 10 years, instead of the current 25 years. If someone does not contribute during the time he/she is resident in Japan, and then the rules change, they lose the ability to contribute for those years. The one risk is that they will “pay for nothing” by never making the 25 years. The other risk is that they don’t pay, and then the rules change, and they should have.

      Third, you ask about the two-years arrearage. That may be a consideration, but what I understand is that the Japan Pension Service simply issues coupons for the 24 months, and then the person can pay along the way. If the person is already 45, this may not be such a bad thing. After all, the payments are deductible from national tax, resident’s tax, and in the calculation for the subsequent year’s national health insurance.

      Finally, there is a current policy of allowing a pension participant to pay up to TEN YEARS in arrears. (That is, beyond the two year statute of limitations.) My understanding is that this is voluntary, and is designed to bring more people into vesting, especially if the rule changes to 10 years in 2015. (That rule change isn’t finalized yet, and may not happen. It depends on what the changes in the consumption tax will be.)

      My advice is, that if your person is 45 years old, they are currently playing with fire if they are not enrolled in either of the Canadian or Japanese pensions. Most people who do it this way end up screwing themselves out of pension money, 20 years down the road (when it’s too late to fix anything). I’ve given you my current understanding of the Canada-Japan rules, and I hope the person you are concerned about makes a good choice.

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