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Introduction to Japanese National Pension

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Introduction to Japanese National Pension

The Japanese public pension system is facing significant challenges, with the foundation of the public pension system, the national pension insurance is under enormous pressure from both inside and outside the society.

Over the 65-year period of 1955 to 2020, the average life expectancy of women in Japan has increased from 67.75 to 87.74 years, as well as that of men from 63.60 to 81.64 years, an increase of approximately 30% and 28%, respectively. However, the average number of babies born to each woman has declined from 2.37 in 1955 to 1.36 in 2019, while the number of babies born to each woman to maintain Japan's population is expected to be 2.07, resulting in a declining and aging population. In 2020, 28.88% of Japan's total population will be aged 65 years or older, and this figure is expected to reach 31.19% in 2030.

In this passage, Kaizen will briefly introduce the Japanese National Pension system as well as summarizing the enrolling processes and settlement methods based on the information from the Ministry of Health, Labour and Welfare of Japan, for a reference to our current and potential clients. In addition, Kaizen do provide services on social insurance enrolment and salary calculation in Japan, please contact our consultants for further information.

The Ministry of Health, Labor and Welfare may modify the requirements and regulations for national pension without notification. For details of the national pension system in Japan, please consult the national pension counter of your local government or your nearest pension office.

Outline

National Pension is a basic pension that is administered by the Japan Pension Service under the National Pension Act, and which is part of the public pension insurance system in Japan. Depending on the type of payment, national pensions are mainly categorized into old-age basic pensions, disability basic pensions, bereaved basic pensions, widows' pensions, death allowances, and so on.
Participant

National Pension Insurance is designed for all Japanese residents over the age of 20 and under the age of 60. Japanese nationals who are living outside of Japan are not obligated to participate in the National Pension Insurance but may voluntarily participate in it during the period in which they are 20 years of age or older and under 65 years of age.
Premiums

The Ministry of Health, Labour and Welfare determines the amount of monthly premiums to be paid by the participants. For example, in the fiscal year of Reiwa 4 (April 2022~March 2023), the monthly premiums to be paid by National Pension Participant No. 1 (farmers, individual business owner, the unemployed, etc.) and those who voluntarily participate in the National Pension will be JPY 16,590, and in the fiscal year of Reiwa 5 (2023), the monthly premiums to be paid have been reduced to JPY 16,520 per month.

Participants can contribute an additional 400 yen in premiums according to their financial situation, with an additional amount (200 yen × number of months of additional premiums paid) to be received when applying for the Old-age Basic Pension in their twilight years.

The national insurance premiums paid by the participant can be deducted against taxable income on the income tax return.

Enrollment Procedures

Starting from October 2019, individuals who have reached the age of 20 and are living in Japan will receive a “Notification for Enrollment in the National Pension System” (in Japanese, “「国民年金加入のお知らせ」") from the Japan Pension Service within 2 weeks after their 20th birthday. Those who have enrolled in the Employees' Pension Insurance before their 20th birthday will not receive the above notification.

The following information (including but not limited to) will be included in the Notification of Enrollment in the National Pension System.

(1)	Letter of notification for enrollment in the National Pension System.
(2)	Guidelines on participation in the National Pension Insurance and premiums
(3)	Basic Pension Number Notice
(4)	National Pension Payment Notice
(5)	Application for National Pension Contribution Special Payment System for Students
(6)	Application for National Pension Contribution Exemption／Payment Postponement
(7)	A stamped addressed envelope

The Basic Pension Number Notice is an important piece of information for confirming premium payment and receiving annuity benefits in the future, it should be kept in a safe and secure manner.

Payment Methods

There are four types of payment methods for national insurance premiums, including remittance, credit card payment, paying through a counter, and electronic payment, details of which are as follows:

(1)	Remittance Remittance is a good choice for those who prefer to avoid the risk of forgetting to settle bills or to reduce effort and time spent on payments. Participants can visit the nearest pension office or financial institution to apply for remittance, and once the remittance is made for the first time, each subsequent remittance will be made automatically to the account.
(2)	Credit Card Payment Participants can apply to pay the premiums by credit card at a pension office. Upon approval of the application, the pension office will charge the premiums to the participant's credit card on a regular basis. Participants who choose this method should be aware of the credit limit and expiration date of the credit card. If the credit card expires, the participant should go to a pension office again to renew the credit card payment. However, in principle, participants who use a credit card issued by a designated agent (in Japanese, “指定代理納付者” referred to a credit card issuer designated under the National Pension Act) do not need to take the procedure for renewal.
(3)	Paying Through a Counter After receiving the payment notice (in Japanese, “納付書”) from the Japan Pension Service, the participant may bring along the notice to a financial institution, post office, or convenience store that accepts insurance premiums payment and settle the premiums at the corresponding counter or ATM. Generally, only cash will be accepted at the counter or ATM. Participants who have not received or have lost the payment notice should visit the nearest pension office to apply for a (re)issuance of the payment notice
(4)	Electronic Payment Participants can pay their insurance premiums through online banking, mobile banking and phone banking. The use of electronic payment methods allows participants to pay premiums anytime, anywhere, but usually requires a contract with the appropriate financial institution

Contribution Exemption／Payment Postponement

There are separate arrangements for those with financial difficulties, such as the Special Payment System for Students (in Japanese, “学生納付特例制度”), the Payment Postponement Scheme (in Japanese, “納付猶予制度”), the Full Exemption System, and the Partial Exemption System, etc.

(1)	Special Payment System for Students Participants who have no income or income below a certain level during their studies may not be able to receive the Old-Age Basic Pension and the Disability Basic Pension in the future due to non-compliance with the payment requirements. Therefore, if the income of the above-mentioned participants did not exceed [1,280,000 yen + deduction for dependent relatives, etc. + deduction for social insurance premiums] in the previous year, they can apply for a deferred payment of the premiums. Students are only subject to the special payment system for students, and not subject to the payment postponement scheme, full exemption system, and partial exemption system.
(2)	Payment Postponement Scheme From July 2021 to June 2030, any participant who is under the age of 50 and whose income for himself/herself as well as his/her spouse for the previous year does not exceed [¥320,000 + (number of dependents +1) x ¥350,000] is eligible to apply for postponement of the insurance premium payment.
(3)	Full Contribution Exemption Scheme From July 2021, participant whose income for himself/herself as well as his/her spouse and householder for the previous year does not exceed [¥320,000 + (number of dependents +1) x ¥350,000] is eligible to apply for a full waiver of insurance premiums. If the exempted premiums are not paid in the future, the insured person will receive only 50% of the annuity that he or she would normally receive. Depending on the situation, a participant may also be eligible for a full waiver of premiums when he or she becomes unemployed.
(4)	Partial Contribution Exemption Scheme The partial contribution exemption system, also known as the partial payment system, refers to a certain percentage exemption system for participants whose income from the previous year does not exceed a certain amount for themselves, their spouses, and the householder. Take the premium of 16,590 yen per month for Reiwa 4 (2022) as an example, the details are as follows: i. Participants, their spouses and the householder whose income for the previous year did not exceed [¥880,000 + deduction for dependent relatives, etc. + deduction for social insurance premiums] are exempted from paying 75% of the premiums, i.e., they are only required to pay 4,150 yen per month, but the participant is only entitled to a pension at the rate of 62.5% of the normal rate. ii. Participants, their spouses and the householder whose income for the previous year did not exceed [¥1,280,000 + deduction for dependent relatives, etc. + deduction for social insurance premiums] are exempted from paying 50% of the premiums, i.e., they are only required to pay 8,300 yen per month , but the participant is only entitled to a pension at the rate of 75% of the normal rate. iii. Participants, their spouses and the householder whose income for the previous year did not exceed [¥1,680,000 + deduction for dependent relatives, etc. + deduction for social insurance premiums] are exempted from paying 25% of the premiums, i.e., they are only required to pay 12,440 yen per month , but the participant is only entitled to a pension at the rate of 87.5% of the normal rate.
(5)	Statutory Exemption System Participants who are receiving the disability basic pension, or livelihood subsidies will be entitled to a full waiver of the insurance premiums after submitting a written application at the national pension counter of the local government office.
(6)	Maternity Exemption System From April 2019, female participants will be exempt from a percentage of the premium for a period of time before and after giving birth, and the exemption will not affect the amount of future pension receivable.

Pre-payment Offer

Participants can choose whether or not to make prepayment of insurance premiums according to their own financial situation, with a favorable policy if they choose to pre-pay the premiums. For example, if a participant pays the insurance premiums on a regular basis (either in cash with a payment notice or by remittance before the end of the following month), the amount payable per month will be 16,590 yen. In the case of pre-payment, the following table shows the benefits that a participant can enjoy according to the method of payment and the period of pre-payment:

Pre-payment period	Payment Method	Amount payable (Yen)	Amount Payable (Yen)	Average Monthly Discount (Yen)
Remittance at the end of the month		16,590	16,540	50
6 months in advance	Cash	99,540	98,730	135
6 months in advance	Remittance	99,540	98,410	~188
1 year in advance	Cash	199,080	195,550	~294
1 year in advance	Remittance	199,080	194,910	~348
2 years in advance	Cash	397,320	382,780	~606
2 years in advance	Remittance	397,320	381,530	~658

The Japan Pension Service will send letters of payment for prepayment of 6 months and 1 year in early April each year, and participants can make prepayment with the letters of payment directly. If the participant would like to make a prepayment for 2 years, he/she should make a separate application to the pension office or other corresponding financial institution before March 1 of each year

Kaizen with experienced team of professionals, providing services of company formation, registration, and application for several types of permits/licenses and subsequent maintenance, tax planning and auditing services, please consult our consultants for more details.

Referenced from：

1. e-Gov法令検索 -国民年金法（昭和三十四年法律第百四十一号）

2. Japan Pension Service (日本年金機構)

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:
Email: info@kaizencpa.com
Tel: +852 2341 1444
Mobile : +852 5616 4140, +86 152 1943 4614
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Introduction to Japanese National Pension

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