Japan: Foreign Nationals and the Japanese Pension System

Dec 07, 2002

Foreign nationals on visas who do not sustain work in Japan for 25 years will not qualify for pension benefits upon retirement. Up to 22 years of pension contributions may be lost. Japanese nationals, special permanent residents and permanent residents are eligible to apply for ‘karakikan,’ whereby any periods of residence abroad are factored into the period counted for pension eligibility requirements. Thus, they do not need to work in Japan for 25 years in order to qualify for pension benefits.

~Author: Stephanie Houghton and Steve van Dresser

Date: 2002.12.7

This paper outlines the place of foreign nationals within the Japanese pension system. The information provided was confirmed by the Social Insurance Operations Centre in Tokyo in October 2002. Please note that foreign nationals’ refers to foreign nationals officially resident in Japan on visas, which is to be distinguished from permanent residents. Only the latter are eligible for ‘karakikan’ (see Q26-32 below.) Questions 1-40 give information about the pension system. Questions 41-44 provide basic information on permanent residency. Much of the information provided in this paper can be found in the various official multi-lingual documents available but the rules regarding ‘karakikan’ are only available in Japanese. All documents should be available at your local Social Insurance office or the Social Insurance Operations Centre at the following address:

Shakai Hoken Gyomusenta,

Social Insurance Operations Centre,

3-5-24 Takaido-Nishi, Sugihama-ku,

Tokyo-to 168-8505, Japan.

Tel: 03 3334 3131 Fax: 03 5344 1194

Please note that the information contained in this paper may be qualified by any international agreement that may be in place between the Japanese Government and the government of your country regarding pension liability and/or benefits. Japan already has social security agreements with Germany and the UK, but whereas the agreement with Germany involves ‘totalisation’ (whereby pension contributions made in one country count in the other), the current UK-Japan Social Security Agreement only covers the prevention of dual insurance liability under the pension system. (British nationals must contribute to one or either of the systems but pension contributions made in one country do not count in the other when it comes to calculating pension benefits.) Information on the agreement between Japan and the UK can be found on this web site. The Japanese Government is reportedly negotiating agreements with other countries.

All information is contained in this paper is therefore subject to change and for further enquiries, you are recommended to contact your local Social Insurance office or the Social Insurance Operations Centre in Tokyo at the address given above. Enquiries may be addressed in English (and perhaps other languages.) When making a written inquiry regarding your pension, you are requested to give your basic pension number and pension code, full name with phonetic transcriptions in kana, date of birth, and telephone number.

A: Insured Persons

Q1: What categories of insured persons are there under the Japanese National Pension system?

There are 3 categories of insured persons. The category of worker is based on whether he/she is employed at a workplace with more than five employees or not. This is also applied to foreigners living in Japan with working visa.

Category 1 insured persons include farmers, self-employed persons, free-lance workers, non-salaried employees, salaried employees who do not participate in the Employees’ Pension Insurance (kosei nenkin) or other schemes, unemployed persons, students etc.

Category 2 insured persons include salaried employees working for companies, government offices, schools, corporations etc who participate in the Employees Pension Insurance (kosei nenkin), Mutual Aid Associations (kyosai kumiai) etc.

Category 3 insured persons include spouses dependent upon category 2 persons.

· Category 1 insured persons

Q2: What is the National Pension (kokumin nenkin) system?

This is the basic pension (kokumin nenkin) for all adults. All residents in Japan (aged 20 years or over but under 60 years) should participate in the scheme regardless of nationality. The self-employed have to contribute a fixed amount per month. The unemployed should also contribute. There is special treatment of exemption if the unemployed request.

Q3: How much are monthly insurance premiums?

The insurance premium of category 1 insured persons is 13,300 yen per month. Only category 1 insured persons are required to pay the monthly insurance contribution of 13,300 yen.

Q4: Are foreign workers eligible?

All foreign residents who have an alien registration card should join the National Pension plan unless they can convince the Commissioner of the Social Insurance Agency that they would be unable to contribute long enough to benefit. (E.g. If they are over 45 years old and will not be able to contribute for 25 years.) People have to be resident in Japan in order to contribute. Japanese, but not foreigners, can retroactively pay in for time spent overseas, which could also be counted as a complementary period (karakikan.)

Q5: Is participation mandatory?

Yes, it is mandatory. Participation in the National Pension system is obligatory for all persons with an address in Japan. A big problem for Japans retirement system is the growing number of young people who are not contributing. Another problem, more publicized, is the declining number of young people. Contributions to National Pension (kokumin nenkin) are optional for everyone after the age of 60. You can optionally continue to pay into National Pension (kokumin nenkin) between the ages of 60-65, to increase pension benefit levels when you start drawing at the age of 65. The maximum contribution period is 40 years.

· Category 2 insured persons

Q6: What is the Employees’ Pension Insurance (kosei nenkin) system?

The Employees’ Pension Insurance (kosei nenkin) is for private companies. All individuals who are employed at an applicable company are insured under the Employees Pension Insurance Law. The Employees Pension Insurance system and the National Pension system are unrelated. People have to have salaried work in Japan to take part in this plan. (Foreign nationals also have to have salaried work to get a work visa.) Workers pay health insurance and retirement insurance monthly.

Q7: How much are monthly contributions?

Monthly insurance contributions are calculated on the basis of an individual’ s standard monthly remuneration (grades/monthly amounts are divided into 30 grades (from 98,000 yen to 620,000 yen) by multiplying the standard monthly remuneration by the contribution rate. The insurance contributions are deducted at source, i.e. from the monthly salary.

Q8: Does the employer make Employees’ Pension Insurance contributions on behalf of the employee? Yes. Employer and employee make equal contributions.

Q9: What is the Mutual Aid Association (kyosai kumiai) pension system?

This is the pension system for public servants who are participating in the national public service personnel mutual aid associations, regional public service personnel mutual aid associations or private and public school personnel mutual aid associations.

Q1O: Can foreigners become public employees?

It is not possible for foreigners to become national public servants, except in the case of tenured faculty members at national universities. It is extraordinarily unusual for a foreign national to become a public employee. However, if an individual is participating in the national public service personnel mutual aid associations, regional public service personnel mutual aid associations or private and public school personnel mutual aid associations, they would be participating in the Mutual Aid Association Pension (kyosai kumiai) system. There are no exclusionary regulations based on nationality.

Q11: How much are monthly premiums?

The contribution is based on salary. The current premium rate is 17.35 per cent.

Q12: Does the employer make Mutual Aid Association Pension contributions on behalf of the employee?

Yes. Employer and employee make equal contributions. Readers are requested to reconfirm the matters addressed in the above four questions with the Federation of National Public Service Personnel Mutual Aid associations (1-1-10 Kudan Minami, Chlyoda-ku, Tokyo 102-8082. Tel: 03-3265-8141.)

· Category 3 insured persons

Q13: How much are monthly contributions?

Category 3 persons do not need to pay premiums because they are dependants.

B: Exemption from the National Pension

Q14: Can category 1 insured persons be exempt?

Individuals who apply to the Director General/Commissioner of the Social Insurance Agency for optional withdrawal from the National Pension system will have their request approved.

Category 1 insured persons may be exempt if it is too difficult for them to pay due to economic reasons. Exemption affects the level of benefits they will receive in the future. Payments may be made up later in life under certain conditions (within ten years). Readers should contact the Social Insurance Office or National Pensions section of the municipality where they live, for more information.

Category 1 insured persons with foreign nationality, who temporarily live in Japan; and cannot meet the 25 year eligibility period to receive the Old Age pensions, even if they continue to take part in the National pension until 60 years of age, may discontinue being insured persons with the approval of the Director general/Commissioner of the Social Insurance Agency. Readers should contact the Social Insurance Office where they live, for more information.

Q15: Can category 2 insured persons be exempt?

No. Under the Employees’ Pension Insurance, there is no exemption scheme for category 2 insured persons because all category 2 insured persons obtain regular payment from their employers. Insured persons who are receiving a salary from an applicable company cannot discontinue their insurance liability. The lump-sum withdrawal payment system is available in the event that provisionally paid contributions are not linked to pension benefits.

Q16: Can students be exempt?

Students are covered by government ordinance provisions. Students attending night schools may apply for exemption. Students attending schools whose annual income ls 680,000 yen or less may apply for exemption. Readers should contact the social insurance office or national pension section of their municipality. Payments may be made up later in life under certain conditions (within 10 years.)

C: National Pension Benefits

Q17: What are National Pension benefits like?

There are 3 types of pension benefit; the old-age basic pension, the disability basic pension and the survivors’ basic pension.

Q18: What is the Disability Basic Pension like?

Insured persons will be entitled to this if they are a member of the National Pension system at the time of first medical consultation of the disability and are recognised as being disabled due to disease or injury. (Class 1 disability: 1,005,300 yen per year. Class 2 disability: 804,200 yen per year.)

Q19: What is the Survivors Basic Pension like?

If an insured person dies, their spouse and chiid(ren) who have been supported by the deceased insured person’s income are entitled. The pension amount for wife with one child is 1,035,600 yen per year.

Q20: What is the Old Age Basic Pension like?

Insured persons will be entitled to this if they have been a member for 25 years or more and reach the age of 65. All insurance periods are taken into consideration. Benefit is based on amount contributed but subject to change on the basis of legal revisions, a slide in prices, etc. This is not limited to the basic Old Age Pension but also applies to the Disability Basic Pension and the Survivor’s Basic Pension.

D: Loss of Pension Benefits

Q21: If I stay In Japan, work for less than 25 years but voluntarily pay National Pension (kokumin nenkin) premiums for 25 years, am I still entitled to both National Pension (kokumin nenkin) and Employees’ Pension (kosei nenkin) benefits?

If an individual has paid insurance contributions for 25 years, they will have fulfilled the eligibility requirements for the Basic Old Age Pension and are thus entitled to receive basic Old Age Pension benefits from the age of 65, on the basis of the number of months of insurance contributions paid. Individuals who have satisfied the eligibility requirements for the basic Old Age Pension are entitled to receive Employees Old Age Pension benefits if they have been insured for more than one year under Employees Pension Insurance.

Q22: What happens to my old age pension if I work and pay premiums for less than 25 years?

This depends on whether the foreign national is on a working visa or has been granted Japanese nationality or permission for permanent residency. Generally, foreign nationals will lose all benefits except for the lump sum benefit based on months of contribution, if they have been covered for more than 6 months under the national pension or employees’ pension insurance. (See below for the details.) The Lump Sum Withdrawal Benefit is paid to non-Japanese only.

· Insured period under National Pension Amount of benefit

between 6 and 11 months - 39,900 yen

between 12 and 17 months - 79,800 yen

between 18 and 23 months - 119,700 yen

between 24 and 29 months - 159,600 yen

between 30 and 35 months - 199,500 yen

36 months or more - 239,400 yen

· Insured period under Employees’ Pension Insurance Amount of benefit

between 6 and 11 months - Average Monthly Remuneration x 0.5

between 12 and 17 months - Average Monthly Remuneration x 1.0

between 18 and 23 months - Average Monthly Remuneration x 1.5

between 24 and 29 months - Average Monthly Remuneration x 2.0

between 30 and 35 months - Average Monthly Remuneration x 2.5

36 months or more - Average Monthly Remuneration x 3.0

However, foreigners who have been granted Japanese nationality or who have received permission for permanent residency are eligible for ‘karakikan’ (see Q26-32 below.) Any periods of residence in a foreign country occurring after April 1, 1961 up to the day preceding the day on which Japanese nationality was granted, etc., while between the ages of 20 and 59 years, are counted as ‘karakikan.’ In order to be eligible to receive basic Old Age Pension benefits, the period of contribution payments plus the total eligible period ‘karakikan’ (periods of ‘karakikan’ are factored into the period counted for pension eligibility requirements but not into the calculation for benefits) should total 25 years. If the 25-year eligibility requirement is not fulfilled, it is not possible to receive pension benefits. Periods during which an individual is not under salary from a Japanese company are basically counted as periods as a category 1 insured person under the National Pension and contributions will be payable. Such periods will not be counted as karakikan.’ Readers should clarify the details with the Social Insurance Agency in Tokyo.

Q23: Can contributions be refunded?

Once paid, the premiums cannot be refunded, even if insured persons withdraw before reaching 65 years. However, if an alien for a short-term stay has participated in this for more than 6 months but has not received any benefits, they can receive a lump sum benefit upon departure from Japan, the amount of which will depend upon the period during which they have participated in the plan. (See table above) Claim must be made within two years of permanently leaving Japan.

Q24 Can category 1 foreign workers who leave Japan claim back the lump-sum repayment from the National Pension (kokumin nenkin)?

Yes. The claim for lump sum withdrawal benefit has to be made within 2 years from the date of departure from Japan. Claims can be obtained at local Social Insurance Offices. The same lump-sum withdrawal payment system for foreigners that is available for the Employees Pension Insurance is also available for the National Pension.

Q25: Can category 2 foreign workers who leave Japan claim back the lump-sum repayment from both the National Pension (kokumin nenkin) and Employees’ Pension (kosel nenkin)?

Yes. The lump-sum withdrawal payment system is available for both the National Pension and the Employees Pension Insurance.

E: Japanese nationals, permanent residents and special permanent residents

Q26: What is ‘karakikan’?

For Japanese persons who hold Japanese nationality, any periods of residence in a foreign country occurring after April 1, 1961, while between the ages of 20 and 59 years, are counted as ‘karakikan’ (periods of “karakikan” are factored into the period counted for pension eligibility requirements but not into the calculation of the amount of benefits) when the eligibility requirements for the basic Old Age Pension are adjudicated.

For foreigners who have been granted Japanese nationality or who have received permission for permanent residency (persons who have become naturalized Japanese citizens and have been granted nationality or who have received permission for permanent residency, etc., at any time after their twentieth birthday up to two days prior to their 65th birthday: same hereunder), any periods of exemption from the National Pension while resident in Japan, occurring between April 1, 1961 and December 31, 1981, while between the ages of 20 and 59 years are counted as ‘karakikan.’ In addition, for foreigners who have been granted Japanese nationality or who have received permission for permanent residency, any periods of residence in a foreign country occurring after April 1, 1961 up to the day preceding the day on which Japanese nationality was granted, etc., while between the ages of 20 and 59 years, are counted as ‘karakikan.’

Q27 If you leave Japan and take up residence somewhere else, does that time also count as karakikan’?

Any periods of residency in a foreign country occurring after April 1, 1961 up to the day preceding the day on which Japanese nationality was granted or permission for permanent residency was received, etc., while between the ages of 20 and 59 years, are counted as ‘karakikan’ in the total eligible period. Accordingly, a foreigner who first comes to Japan at the age of 30 and is granted Japanese nationality or permanent residency before turning 65 years of age will have the 10-year period from age 20 counted as a period of foreign residency in the total eligible period. Any periods spent in a foreign country thereafter will be factored into the total eligible period. Nevertheless, as of December 31, 1981 it became possible for all individuals with an address in Japan to participate in the National Pension, irrespective of their nationality, thus periods of residency in Japan will not be factored into the total eligible period.

Q28 If you stay in Japan but do not work for a Japanese company, does this also count as ‘karakikan’?

For foreigners who have been granted Japanese nationality or who have received permission for permanent residency, any such periods occurring between April 1, 1961 and December 31, 1981, while between the ages of 20 and 59 years, will be counted as ‘karakikan.’

Q29 Who is entitled to ‘karakikan’?

Japanese persons who hold Japanese nationality who have resided in a foreign country since April 1961 while between the ages of 20 and 59 years are eligible. Foreigners who have been granted Japanese nationality or who have received permission for permanent residency are also eligible.

Q30 Does ‘karakikan’ apply to all the National Pension (kokumin nenkin), Employees’ Pension (kosei nenkin) and Mutual Aid (kyosai kumiai) pension schemes?

‘Karakikan’ applies to the National Pension, Employees’ Pension Insurance and Mutual Aid Association pensions.

Q31 What documents do permanent residents need to claim ‘karakikan’?

Permanent residents who have spent time abroad should show originals of old passports to Japanese Social Insurance Officials and prove the first date of entry to Japan. It is a good idea to show them all relevant entry and exit visa pages, a time line chart showing where and when you came, worked, became a permanent resident, etc. to make their calculations easy. It is necessary to attach documents evidencing periods of karakikan’ (documents verifying periods of residence in a foreign country, the dates on which Japanese nationality was granted or permission for permanent residency was received, etc) Within a few weeks, you should receive an official notification that your ‘karakikan’ is recognized. Send a copy of this notification to the kosel-nenkin private fund organization because they use the same ‘karakikan’ eligibility rules.

Q32: Where can I get a copy of the ‘karakikan’ rules?

' Karakikan’ rules can be obtained at the Social Insurance Agency. Unfortunately, only Japanese is available.

F: Non-permanent foreign residents on working visas

Q33: What happens if foreign nationals on visas work for less than 25 years?

Foreign nationals on visas (work visas, spouse visas, religious visas, student visas, culture visas etc.) who have paid into these plans for 24 years or less can get the Lump Sum Withdrawal benefit for both the National Pension and the Employees Pension Insurance after they leave Japan. The claim must be made within two years of leaving Japan.

Q34: Why are they not entitled to ‘karakikan’?

Since they are expected to leave Japan after their visas expire, they are not considered fully part of the system; they have “guest” status.

Q35: Can foreigners lose up to 22 years old age pension contributions?

Yes. However, their contribution records are recorded on the database of the Social Insurance Agency. If Japan concluded a social security agreement with their country in the future, those records would be considered. Japan already has social security agreements with Germany and the UK, but the totalization system only applies to Germany. However, whilst they are enrolled in the system, they are eligible to receive the Disability Basic Pension (should they become disabled) and their spouse/children will be entitled to receive the Survivor’s Basic pension (should they die.)

Q36: Might this leave them completely without a pension (if they do not qualify in their home country either because they have been working in Japan)?

Yes. Basically, if a foreign national has not fulfilled the 25-year eligibility requirement, they will not be able to receive pension benefits. In order to avoid such cases, the Japanese government is accelerating the negotiation of social security agreements with other countries. (Yet, in most European countries, public pension plans require less than 10 years of insurance period.)

Q37: Is there no legal protection against this?

Japan has concluded social security agreement with Germany and the United Kingdom. Japan is also under negotiation with some countries. The current UK-Japan Social Security Agreement only covers the prevention of dual insurance liability under the pension system.

Q38: What happens to the contributions they have made over the years?

The money is used to pay the pensions benefits of the people remaining in the Japanese system. The lump-sum withdrawal payment system is available for foreign nationals in the event that provisionally paid contributions are not linked to pension benefits.

Q39: Why is enrolment in the pension scheme obligatory for foreign nationals on visas?

Old age pension contributions are obligatory because the pension is not actually attached to them. They are not paying for themselves. They are paying for the generation before them. The Japanese public pension system, which consists of the National Pension, Employees’ Pension Insurance and Mutual Aid Associations, was conceived in order that successive generations could help each other and is formulated in that spirit. "Transit” foreigners are required to contribute towards the pension benefits of older Japanese nationals. The pension system does not only provide old-age benefits but also disability and survivor’s benefits. Foreigners therefore do get some social security cover from the disability basic pension and the survivor’s basic pension.

Q40 Can foreign nationals on visas (who will probably not work in Japan for 25 years) opt out of the system?

No. Under National Pension law, enrolment in the pension system is obligatory. However, category 1 insured persons who will not be able to meet the 25 years of insurance period may opt out with the permission of the Commissioner/Director General of the Social Insurance Agency. Under Employees’ Pension Insurance law, enrolment in the pension system is obligatory, and category 2 insured person cannot opt out even if they cannot meet the conditions to receive pension benefit in the future. Category 2 insured persons are not able to discontinue their insurance liability as long as they are receiving a salary from a company that is covered by Employees’ Pension Insurance.

G: Permanent Residency

Q41 What exactly is permanent residency?

Permanent residency is a formal status conferred by the Japanese government to foreign citizens who desire to remain in Japan, make an application and persuade the Japanese authorities of their sincerity and worthiness. Conditions of eligibility appear to vary by region, so check with your local immigration office. You will, for example, be expected to have resided in Japan for a certain period of time, to have established roots in Japan, that you respect the culture, have been steadily employed. You may be asked to submit an essay in Japanese to support your application.

Q42 What are the benefits of being a permanent resident?

Permanent residents are entitled to ‘karakikan’ when they apply for pension benefits. It is very helpful in obtaining credit in Japan, for obtaining a mortgage and it allows you to set up a company. You do not need to work in order to stay in Japan.

Q43 Do permanent residents literally have to reside permanently/for a certain number of days per year?

No. You don’t even have to live in Japan. You just have to be in Japan once every 2 or 3 years to renew either your alien registration or re-entry permit. You can’t send a 3rd person to do this on your behalf, unless you have a serious health condition. Basically, permanent residence is for life, so it can’t be lost (unless you fail to renew your alien registration and re-entry permit.)

Q44 What are the implications back home?

Permanent residency has no effect on citizenship. If your country allows, you can vote absentee. You must also keep a valid passport of your home country.