A Japanese pension may be possible after ten years of contributions.

This is picking up on a post last week over on debito.org.

Someone wrote in to say that their local government levied on a bank account to pay for either pension or health insurance premiums that hadn’t been paid. If you are one of my readers outside of Japan, you may be surprised to learn that social security payments aren’t collected the way they are in most countries–like a tax. Instead, the local government “bills” you, and then you “choose” to pay the bill. This is so, even though the national pension and national health care are mandatory. (Alternatively, you can get these through your employer, where the payments are withheld from earnings.)

It takes 25 years of payments before someone is vested in the Japanese pension. So many foreigners have tried to dodge the pension over the years, figuring they will never be in Japan long enough. However, in the past decade, totalization agreements have been made, where Japan counts the years you pay into your home country’s social security. I always give myself as an example, where I had 23 or 24 years in U.S. social security BEFORE I went to Japan. So, within the first year or two, I had a combined twenty-five years between Japan and America. I was probably one of the first people my age to vest in the Japanese pension system, since Japanese start contributing at 20, and I had paid into U.S. social security since age 14.

Recently, Japan has been talking about reducing the vesting years to ten, so that ten years would be enough to collect a pension. The question then comes up: do you pay into the pension on the chance that it goes to ten, from twenty-five.

Debito suggests no, but I still say yes. The whole problem with deferred annuities (which is what the pension system is), is that you must pay for them ahead of time. This means you have to have been in the program along the way. You can’t WAIT, and then see if you should have made the payments. This is really not how insurance works.

Look it, the excuses that people will use so as not to pay are many. But what is happening in Japan is that the various escape doors to this program are being closed. It’s likely that selective governments are now looking to see if there are assets to attach, now that they are paying closer attention to who is in, and who is not.

[Update: AND, from previous blogging, you should know that Japan is voluntarily allowing backpayments (JP) of up to 10 years, and will do this through 2015. The expected consumption tax hike that would support ten-year vesting (JP) would begin in April 2014.]

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[Update #2: For those who’ve followed this story for a couple years, isn’t it clear that the pattern is one of serial rule tightening, and scattered enforcement? This is generally how change happens there.]