Opinion and Perspective
Pensions, the Conversation WorthHavingGregory Strong
Writer and consultant
As educators in Japan, we need to discuss pensions in order to better prepare for retirement.
Some part-time teachers have never registered for kokumin nenkin [national pension]. Yet
these modest benefits are accessible after only 10 years of contributions and while small,constitute reliable income. Retirees may also be eligible for foreign pensions. NISA andiDeCo investment accounts begun earlier in one’s career can assist, too. Rental income
from revenue property or from renting part of one’s home can help fund one’s retirement,
but it is difficult to get a conventional mortgage once retired. Full-time employees canalso benefit from taishokukin [retirement or severance money] as well as kosei nenkin[employees’ pension] which is available to pensioners who have been contributing throughtheir workplaces. This short article by an educator, not a financial planner or an accountant,outlines these pensions and introduces some resources in order to promote a much-needed
conversation.
日本の教育者として、退職を より良く準備してくために、私たちは年金について考える必要がある。

非常勤講師の中には、国民年金に登録をしていない者もいる。

国民年金の受給には拠出開始から10年経っている必要があり、受給額も少額ではあるが、信頼性のある収入となる。また、退職者は海外の年金も同様に受給資格がある可能性もある。キャリアの早い段階においてNISAやiDeCoへの投資をすれば、それも退職準備の手助けとなるだろう。収益物件や家の一部を貸し出す賃貸収入
による収入さえ、退職をサポートしてくれる。ただ、一度退職してからの住宅金融は困難である。正職員は職場を通じて支払っている厚生年金に加え、退職金も受け取ることができる。本稿ではファイナンシャルプランナーや会計士でなく、教育者としての筆者が、このような年金制度を説明し、誰もが考慮しなければならない議
題を提議するため、いくつかの資料を紹介する。

Just before my 60th birthday, I received a large green envelope containing an
estimate of my future pension. I was shocked at how small it was and kept looking
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for missing pages. The experience brought home to me the larger problem. We
handle the rituals of retirement very well in Japan, at least for full-time employees,
providing them with public recognition and retirement parties. But initiating a
conversation about pensions, one I should have had much earlier in my career,
seemed like breaking a taboo.
If one is a full-time faculty member, there are the modest sums of 厚生年
金 [kosei nenkin/the employee pension plan] and of 退職金 [taishokukin/theretirement or severance money paid on retirement]. Then there is the meager
国民年金 [kokumin nenkin/national pension plan], which may be all a parttime lecturer teaching at several universities will receive. Thankfully, teachersplanning their retirement have a growing number of online resources as well as a
useful book for foreigners, The Expat's Guide to Growing Old in Japan: What You
Need to Know (Penn, 2017), with its overview of retirement and the Japanesepension system.

Kokumin Nenkin: The National Pension Plan

Discussing the kokumin nenkin first, both full-time and part-time lecturers pay amodest monthly premium of ¥16,610 ( Japan Pension Service, 2021). According
to explanations at the JPS website, a full government pension with 40 years(480 months) of contributions pays out ¥780,900 annually. Using the formulaon the website, in my case, 25 years (300 months) brings in 0.625 (62.5%) of afull pension, or ¥488,062 each year. Full-time faculty have their contributions
deducted automatically from their monthly pay, but part-time lecturers need toregister for it. Legally, all residents of Japan between ages 20 and 59 are required
to pay this premium which not only provides a pension, but also disability
insurance and survivors’ benefits. An excellent posting on the website All About
Japan (Kanert, 2021) outlines the pension system and provides images of theappropriate forms.
I personally know of part-time teachers who have never registered for
kokumin nenkin. They may believe they may not be staying in Japan long orthat the pension is too small to bother. They likely feel that they will not beable to collect it when they retire, particularly if they retire abroad. But at the137Strongvery comprehensive website Retire Japan (with a reader forum, investment andpension information, and coaching), Tanaka (2021a) argues, “Consider it acheap, state-backed annuity. It won’t be enough to meet your needs, but it should
provide a minimal safety stop income that you can build on with your savings
and investments” (para. 6). As with any pension, drawing it early, for example, atage 60 rather than 65, means you will get less. In this case, 70% of your amountat age 65. In a posting about a nenkin statement, Tanaka (2021b) recommends
deferring your pension if you can afford it, “Not taking the pension until the ageof 70 increases it by 42%, and deferring it to 75 will increase it by 84%” (para. 7).
In the past, people who were leaving Japan could only withdraw a maximumof three years of their contributions as a lump sum, but now partial withdrawals
are possible and the period to qualify has been shortened. (Kanert, 2019;
Blincowe, 2018). Pension premiums are tax-deductible, and since 2017 it’s
been possible to claim a pension even after only 10 years of contributions (120months) or ¥195,225 yearly ( JPS, 2021). That amount seems negligible, but
again the income lasts a lifetime and requires no management. Those living
abroad who qualify for the minimum pension, have never taken a lump sum
withdrawal, and have the appropriate documents such as their pension number,
identification, their My Number, and a notarized statement confirming theiridentity and age, can apply through a form on the pension website (Pension
Fund Association, 2021) or use a Japanese accountant who offers such services
to foreigners.

Other National Pension Plans

There is a common misconception about Japan’s international social security
treaties. This supposes that people can transfer their years in the Japanese pension
system and claim the benefits of the more generous pension system of theircountry of origin. Runchey (2021) explains, “Social security agreements canaffect whether you meet the minimum contributory requirements to receive
benefits (what I call eligibility), but they don’t affect the amount of those benefits(what I call entitlement)” (“What social security agreements don’t do” section).
For example, by contacting a JPS office, and also negotiating with the bureaucracy138

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in another country, someone who has worked much of their life in Japan, say 19
years, can borrow a year from those years they contributed to a pension overseas.
However, foreigners in Japan may have other pensions to which they areentitled or to which they can still contribute. Before moving to Japan, I lived
in Canada until age 36 and accordingly qualify for two pensions there, which
combined, rival my kokumin nenkin (Government of Canada, 2021). The
minimum residency requirement there to qualify for Old Age Security (OAS)
is 10 years between the ages of 18 and 65. With 18 years’ residency in my case,the calculation is 18 years divided by 40 years (the total possible pensionable
years), or 45% ($3,323) of the full pension of $7,384 annually. In Canada, I also
made contributions through my employers to the Canada Pension Plan (CPP),
entitling me to collect an additional $3,768 at age 65. As with all pensions, if I
decide to start collecting later, there will be higher premiums.

NISA, iDeCo, and Online Investing

In Japan, if you are young enough, two government investment plans are worth
considering, though you may need help with the Japanese forms when you
open them. The Nippon Individual Savings Account (NISA), which can be
opened at any bank or brokerage, was created in 2014 to stimulate the economy
and promote individual savings (Belhadj, 2019). In brief, one can contribute a
maximum of ¥1.2 million per year for a maximum of five years to the “Ordinary
NISA”, up to a maximum investment of ¥8 million, or contribute an annual totalof ¥400,000 for a period of 20 years to a “Tsumitate NISA,” or a regular NISA
(a plan initiated in 2018) for a maximum investment of ¥8 million (Belhadj,2019). Depending on how you invest the money, and for how long, its value may
increase substantially and help fund your retirement. NISA is modelled on similar
tax-free savings accounts in other countries, such as the 401K in the U.S., theIndividual Savings Account (ISA) in the U.K., and the tax-free savings account(TFSA) in Canada. Those plans are superior because they allow individuals tokeep contributing until their retirement or until contributors reach their 70s. Of
course, with all these plans, you pay taxes on withdrawls, but you can withdraw
small amounts of money from them as needed.
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For those planning to retire in Japan, a more attractive option is to opena 個人型確定拠出年金 [kojingata kakutei kyoshutsu nenkin/iDeCo account](National Pension Fund Association, 2021). It can be opened at banks and otherfinancial institutions, and it enables you to invest in Japanese mutual funds, save
cash, or buy insurance. You can invest pre-tax income until age 60 and cash out
tax-free (to a maximum of ¥22 million after 40 years) when you retire. Selfemployed, part-time workers, including part-time faculty, can contribute larger
monthly amounts to reach this maximum sooner. This is better than tax-freesavings accounts in other countries because although you can’t withdraw moneyfrom it until age 60, you don’t pay tax when you do. Despite these advantages,
the Ministry of Health, Labour and Welfare (2021) reported that by November,
2019 only 1.78 million subscribers held iDeCo funds (p. 13).
Of course, individuals can help fund their retirements by investing in stocks.
They can buy and sell them through discount online brokerages. In Japan, theseinclude Rakuten, Monex, and SBI; and for a brokerage with English support,
there is also Interactive Brokers. Each charges modest fees for stock trades.
You also can use financial advisors who charge fees when you purchase or sellmutual funds offered by their brokerage. Income and dividends from offshore
investments are taxable, but any tax paid overseas is deductible. In addition, since2014, the Ministry of Finance in Japan requires that overseas assets in excessof ¥50 million that are held by permanent residents have to be registered, anddividends and other proceeds are of course taxed (PricewaterhouseCoopers,
2013).
Managing investments yourself is far beyond the scope of this article, but
information once proprietary to investment firms can be easily researched online
and stocks purchased through discount online brokerages. While still in his
30s, a teacher named Andrew Hallam became a millionaire on a teacher’s salaryand his book describes investing in plain language (Hallam, 2017), Millionaire
Teacher includes an excellent explanation of how you can use passive investments
like exchange-traded funds (ETFs) that require little trading or specialist
knowledge, and over time outperform the mutual funds often sold by banks andfinancial advisors. ETFs consist of a broad basket of different stocks traded on
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exchanges around the world such as the Tokyo or New York Stock exchanges.
They have low annual management fees, and can be bought and sold quickly
and more cheaply through online brokerages than buying them from financial
advisors. There are now many types of ETFs specializing in such areas as different
stock exchanges, the tech sector, consumer staples, and large caps (large publicly
traded companies such as Apple or Tesla with a value in excess of US $10 billion).

Rental income

Although not a pension, one source of regular retirement income, often
overlooked, is from renting a property or part of your home. According to theOrganisation for Economic Co-operation and Development (OECD) (2021),
real estate prices in Japan are lower than 32 other member states, including
Australia, Canada, the E.U. area, the U.K., and the U.S. But in my experience,
because buildings depreciate so quickly in value in Japan, it is hard to make aprofit selling a home in the suburbs, in smaller urban areas, or in the countryside.
The numbers improve, though, if you buy an older property in a big city andhang onto it. Several teachers I know have been making a good monthly income
from buying old Tokyo apartments near train stations, renovating them, and thenrenting them out to short-term and long-term tenants. One even converted partof his house into a small studio apartment with its own kitchen and toilet. He
always found renters among students and foreigners staying in Japan who haddifficulty finding accommodation. Because the apartment was in his home, he
could easily keep an eye on his renters.
The Plaza Homes website (2021) describes the lending requirements forbanks in Japan and the procedures for buying property. As the requirements
indicate, if you’ve ever thought about borrowing money to buy a home, or aninvestment property, you need to do this while still working. This has come as ashock to several of my retired friends. No matter how much money they may havein the bank or in stocks, they cannot qualify for a bank mortgage in Japan. Any
property they may wish to buy will have to be purchased in cash. Furthermore,home ownership in retirement may become more important to people than theyrealize because landlords in Japan prefer not to rent to retirees who may develop
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health concerns or have trouble paying for rent increases.

Taishokukin (retirement or severance money)

Tenured faculty at Japanese universities, similar to employees at Japanese
corporations, are also eligible for 退職金 [taishokukin/retirement or severancemoney], a cash payment for years of service. Universities calculate the amountbased on the number of years you have been a tenured employee. There is abase payment for the year you start and then increments each year, with larger
increments at 20 years, 25 years, and so on, depending on the size and finances ofyour school. You can determine your taishokukin by inquiring at your university
administration or payroll office. Mine was ¥14,536,200.

Kosei nenkin (employee pension)

The second pillar of the Japanese pension system is the kosei nenkin [employee
pension], which in my case, is from a private university and administered by the
Promotion and Mutual Aid Corporation for Private Schools of Japan (PMAC).
Founded in 1953 and head-quartered in Tokyo, PMAC also provides memberswith health insurance, home loans, travel discounts, and recreational facilities(PMAC, 2021). Figure 1 shows my pension contributions calculated at ¥620 eachmonth multiplied by 12 months each year, plus ¥1,500 x 4 for my two bonuses

Figure 1. Pension contributions.
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Pensions, the Conversation Worth Having, OnCUE 14(1), pages 136-146(two months’ salary), paid in June, and then again in December. When this form
was issued (which was not at the end of the school term and therefore did notcontain all of my contributions), I had contributed a total of ¥14,289,675.
Figure 2 shows 291 months of contributions over some 25 years (thoughagain, there would be additional contributions between the date of the noticeand my last month of teaching.) The columns under 1a indicate potentiallydifferent employers I might have worked for and subsequent insurable earnings
for those months. In my case, I worked full-time at one university for theduration of my 25 years in Japan. I would be eventually drawing an annual
pension of ¥1,608,000, which comes out to ¥134,000 monthly. When I turn 65
later this year, there will be the additional annual benefit I mentioned earlier for
my kokumin nenkin of ¥38,152 each month.
The retirement application form for kosei nenkin was nine pages in lengthand annotated with explanations and examples. In navigating my application, I
found additional help at the PMAC office which offers some English support.
The single most helpful information I received was a documents list. These

Figure 2. Insurable months and benefits at 65.
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consisted of: (1)年金手帳 [nenkin techo/Japanese pension book or a documentwith your pension number], (2)住民票 [juminhyo/certificate of residence (orif living abroad, government-issued identification showing age, address, andbirthday)], (3) bank information for transferring funds, (4) work history andpension contribution periods, (5)源泉徴収票 [gensen choshuhyo/official tax form
noting income tax paid for the current tax year], (6)戸籍謄本 [kouseki touhon/family register], (7) marriage certificate (translated into Japanese), (8) spouse’s
gensen choshuhyo, (9) spouse’s nenkin techo [pension information], (10)納税管理人の届け書 [nozei kanrinin no todokesho/Declaration Naming a Person toAdminister Taxpayer’s Tax Affairs (if the pensioner is leaving Japan)], and (11) atax declaration for U.S. citizens.
After you begin receiving your pension, annually, on your birthday, youwill receive a card in the mail called 現況届 [genkyo todoke/your address andstatus report] that requires your signature (verifying that you are alive), yourMy Number, and a verification of your address. Your spouse will be entitled tosurvivor benefits of up to 50% of your pension, and if you have children under
the age of 18, they may draw benefits, too.

Conclusion

At 65, my kosei nenkin and my kokumin nenkin combined will yield ¥172,153
monthly. The former will likely be subject to a withholding tax of about 10%,depending on the country where it is received, if paid overseas instead of to apensioner living in Japan. In the educational sectors of the G7, public school
teachers and university lecturers often receive pensions that constitute 50% to
80% of their annual earnings. My pension, though lower, is much better thanmany in Japan. This is particularly true for the part-time faculty at my university
who contribute so much, yet are only eligible for the kokumin nenkin. This fact
makes our conversations about pensions and planning for retirement in Japan
more important than ever.

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Acknowledgments

The author would like to thank Melvin Andrade, Tim Knowles, and Nicholas
Lambert, who all read early drafts of this article.

References

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www.pfa.or.jp/english/deferred/howto/index.html
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Author Bio

Gregory Strong was an English Department professor and program coordinator inTokyo for the past 26 years and now works as a writer and educational consultant
with research interests in curriculum design and faculty development. His numerous
publications include chapters in TESOL publications, a biography, and graded
readers.gregstrongtokyo@gmail.com
Received: September 18, 2021
Accepted: September 29, 2021

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