The Future of Japanese Pension

[Jura]

Hello,

My Japanese spouse and I work for ourselves and last year started paying into the Japanese pension. We are both 30. I also pay into the UK pension and already have 13 years ticked off.

I plan to pay into the Japanese pension for at least 10 years over the next 30+ years (I might not always be resident in Japan) so I will receive something. My plan was for my Japanese spouse to pay every year so the maximum eligible can be received.

I've met other young Japanese people recently who work for themselves and are not paying into the Japanese pension since they believe that the Japanese pension won't exist. My spouse has also started saying the same. Now, we don't know the future of pensions, but what are the actual chances of this?

I absolutely won't just be relying on government pensions from the UK and Japan for my retirement, these might be a total of 20% of my retirement planning. But I just wonder if it might be better to use that 34,020 yen per month on property investment in the UK or elsewhere / land we can rent out or turn into a warehouse or car parking / gold / index funds - something where there is at least more of a guarantee of a return and I'm more in control of it.

By the way, if we stop paying into the Japanese pension, will this mean that we can no longer pay into our Ideco accounts?

I'm interested on other's thoughts on the future of Japanese pensions.

[Beaglehound]

If you are not paying into pension, you cannot pay into Ideco I believe.

Although some folk don’t pay in, while you are a resident of Japan it is an obligation. Not paying in could have adverse consequences for visa/PR applications. For your husband, if that will be the only state pension he has, it may well make sense for him to build up a decent level of entitlement as a ‘base’ income and longevity insurance. Nobody knows how pensions will look when you come to retire, but I can’t see them disappearing completely, still a useful ‘investment’ for diversification IMO.

[beanhead]

You have to pay into the Japanese pension. It is not optional.
Plus, once you have started paying in, you cannot escape
If you had never paid in at all you would have more chance of avoiding it, to be honest.
And yes, it is a condition of iDeCo that you are paying in to the pension. That is why it takes so long to set up - they check your pension records.

The argument that there will be nothing left when our time comes is a weak one, I think. It seems to be just an excuse to justify not contributing.
Also, the only people who vote in Japan are old people, so all the time politicians keep having to pander to the retired or those about to retire, I think the system will remain funded Of course that could change in 20 or 30 years time, but...you know...Japan...

[RetireJapan]

I think government pensions are a very good idea for almost anyone. Wrote a bit about it here: https://www.retirejapan.com/blog/pensio ... vestments/

I think there is almost no chance of nenkin disappearing entirely. It is not a general benefit, but one that people pay for by paying into the system. Any future government that decided to eliminate it would last about three seconds.

The nenkin fund is currently the largest in the world: https://en.wikipedia.org/wiki/Governmen ... tment_Fund

If pinch came to shove the government could choose to pay pensions from taxes or just by printing money.

I talk to people sometimes who have not paid into nenkin. They have no idea how they are going to survive once they are not able to work any more. Don't become one of those people.

[Wales4rugbyWC23]

I think government pensions are a very good idea for almost anyone. Wrote a bit about it here: https://www.retirejapan.com/blog/pensio ... vestments/

I think there is almost no chance of nenkin disappearing entirely. It is not a general benefit, but one that people pay for by paying into the system. Any future government that decided to eliminate it would last about three seconds.

The nenkin fund is currently the largest in the world: https://en.wikipedia.org/wiki/Governmen ... tment_Fund

If pinch came to shove the government could choose to pay pensions from taxes or just by printing money.

I talk to people sometimes who have not paid into nenkin. They have no idea how they are going to survive once they are not able to work any more. Don't become one of those people.

I used to be of the same opinion as a lot of foreigners and young Japanese people that the Japanese state pension would run out of money, until Ben made me aware that actually the Japanese state pension is backed up with investments. This gave me a lot more confidence in the system and made me sign up. Although the British state pension is more generous it is a pay-as-you-go system dependent on future generations raising money through supposedly 'ring fenced' national insurance contributions. It is not 'ring fenced and there is no fund! Even worse we are dependent on politicians desire to be liked and gather votes- Triple lock by the Conservatives to buy off the grey vote- not affordable in the medium to long term future.

The Japanese state pension also has tax relief, certainly not available on national insurance contributions. By paying both the Japanese and British state pension you are providing a real secure foundation for a well financed retirement. If anything the British government by not having a pension double payment treaty with the Japanese is doing us Brits a real favour.

[Roger Van Zant]

I think government pensions are a very good idea for almost anyone. Wrote a bit about it here: https://www.retirejapan.com/blog/pensio ... vestments/

I think there is almost no chance of nenkin disappearing entirely. It is not a general benefit, but one that people pay for by paying into the system. Any future government that decided to eliminate it would last about three seconds.

The nenkin fund is currently the largest in the world: https://en.wikipedia.org/wiki/Governmen ... tment_Fund

If pinch came to shove the government could choose to pay pensions from taxes or just by printing money.

I talk to people sometimes who have not paid into nenkin. They have no idea how they are going to survive once they are not able to work any more. Don't become one of those people.

I used to be of the same opinion as a lot of foreigners and young Japanese people that the Japanese state pension would run out of money, until Ben made me aware that actually the Japanese state pension is backed up with investments. This gave me a lot more confidence in the system and made me sign up. Although the British state pension is more generous it is a pay-as-you-go system dependent on future generations raising money through supposedly 'ring fenced' national insurance contributions. It is not 'ring fenced and there is no fund! Even worse we are dependent on politicians desire to be liked and gather votes- Triple lock by the Conservatives to buy off the grey vote- not affordable in the medium to long term future.

The Japanese state pension also has tax relief, certainly not available on national insurance contributions. By paying both the Japanese and British state pension you are providing a real secure foundation for a well financed retirement. If anything the British government by not having a pension double payment treaty with the Japanese is doing us Brits a real favour.

Spot on. I'm looking at about 110,000yen per month from my Japanese "koseinenkin" pension (will have paid in about 35 years by the time I'm 67) and about the same from my UK pension (looking like 33 out of 35 years will be paid in by 67).
I can easily live on 220,000yen per month.
The mortgage will be paid off by then, and I have no kids or wife (could never afford them), so it's just me.
I look upon my iDeco, tsumitate-NISA, and company DB pension purely as safety/luxury/house maintenance money, to make life that little bit more enjoyable in old age.
Anyone who chooses not to pay into the Japanese pension is not only running from their obligations, but also scuppering at least a small safety net in retirement. Paradoxically, most people I know who are most vocal about not paying in are the very people who are also perpetually broke, with no NISA or iDeCo, and who know nothing about saving money.
Any Brit in Japan not paying Class 2 or even Class 3 NI contributions is also crazy! It's such a good deal, especially the Class 2 which I pay each month.

[KCLenny]

Anyone who chooses not to pay into the Japanese pension is not only running from their obligations, but also scuppering at least a small safety net in retirement. Paradoxically, most people I know who are most vocal about not paying in are the very people who are also perpetually broke, with no NISA or iDeCo, and who know nothing about saving money.
Any Brit in Japan not paying Class 2 or even Class 3 NI contributions is also crazy! It's such a good deal, especially the Class 2 which I pay each month.

I can’t afford to pay class 2 for myself AND class 3 for my wife, AND Japanese pension for myself though.
I’m seriously trying. I am in the process of setting up class 2 for myself but I don’t know if I should risk setting up class 3 for my wife as I don’t know if I could commit to it. She has no contributions from her time in the U.K. and doesn’t work here in Japan, so it’s just my income. Wife is already 100% exempt from the Japanese pension and I’m 50% so paying ¥8000~ a month, plus the extra ¥11,000 or so a month for the U.K. pension (on top of other regular bills and health insurance etc) is pushing it.

Which should I prioritise? My wife’s U.K. pension, or our Tsumitate NISA (which I possibly can’t even max out each year)? (Not specifically directed at you, you just asking into the ether as a bit lost and overwhelmed right now

[Wales4rugbyWC23]

Anyone who chooses not to pay into the Japanese pension is not only running from their obligations, but also scuppering at least a small safety net in retirement. Paradoxically, most people I know who are most vocal about not paying in are the very people who are also perpetually broke, with no NISA or iDeCo, and who know nothing about saving money.
Any Brit in Japan not paying Class 2 or even Class 3 NI contributions is also crazy! It's such a good deal, especially the Class 2 which I pay each month.

I can’t afford to pay class 2 for myself AND class 3 for my wife, AND Japanese pension for myself though.
I’m seriously trying. I am in the process of setting up class 2 for myself but I don’t know if I should risk setting up class 3 for my wife as I don’t know if I could commit to it. She has no contributions from her time in the U.K. and doesn’t work here in Japan, so it’s just my income. Wife is already 100% exempt from the Japanese pension and I’m 50% so paying ¥8000~ a month, plus the extra ¥11,000 or so a month for the U.K. pension (on top of other regular bills and health insurance etc) is pushing it.

Which should I prioritise? My wife’s U.K. pension, or our Tsumitate NISA (which I possibly can’t even max out each year)? (Not specifically directed at you, you just asking into the ether as a bit lost and overwhelmed right now

It could be difficult for your wife for the British state pension. You said she resided in the UK but didn't work, did she get a national insurance number? If she didn't work, but did you have kids when you were in the UK then you could have claimed child benefit and that would have got your wife in the system- even better you don't have to make either Class 2 or 3 NICS. You will also probably need to open a gateway account where you check your NICS records. Good luck!!

[Roger Van Zant]

Anyone who chooses not to pay into the Japanese pension is not only running from their obligations, but also scuppering at least a small safety net in retirement. Paradoxically, most people I know who are most vocal about not paying in are the very people who are also perpetually broke, with no NISA or iDeCo, and who know nothing about saving money.
Any Brit in Japan not paying Class 2 or even Class 3 NI contributions is also crazy! It's such a good deal, especially the Class 2 which I pay each month.

I can’t afford to pay class 2 for myself AND class 3 for my wife, AND Japanese pension for myself though.
I’m seriously trying. I am in the process of setting up class 2 for myself but I don’t know if I should risk setting up class 3 for my wife as I don’t know if I could commit to it. She has no contributions from her time in the U.K. and doesn’t work here in Japan, so it’s just my income. Wife is already 100% exempt from the Japanese pension and I’m 50% so paying ¥8000~ a month, plus the extra ¥11,000 or so a month for the U.K. pension (on top of other regular bills and health insurance etc) is pushing it.

Which should I prioritise? My wife’s U.K. pension, or our Tsumitate NISA (which I possibly can’t even max out each year)? (Not specifically directed at you, you just asking into the ether as a bit lost and overwhelmed right now

In your case I would pay Class 2 for myself, and then try to max out the tsumitate-NISA each year.
And pay into the Japanese pension (you've no choice in this anyways).
How can your wife ever get a pension if she doesn't have an NI number? (Sorry, does she have one, or not?)
Is she a British citizen or something?

[Beaglehound]

Anyone who chooses not to pay into the Japanese pension is not only running from their obligations, but also scuppering at least a small safety net in retirement. Paradoxically, most people I know who are most vocal about not paying in are the very people who are also perpetually broke, with no NISA or iDeCo, and who know nothing about saving money.
Any Brit in Japan not paying Class 2 or even Class 3 NI contributions is also crazy! It's such a good deal, especially the Class 2 which I pay each month.

I can’t afford to pay class 2 for myself AND class 3 for my wife, AND Japanese pension for myself though.
I’m seriously trying. I am in the process of setting up class 2 for myself but I don’t know if I should risk setting up class 3 for my wife as I don’t know if I could commit to it. She has no contributions from her time in the U.K. and doesn’t work here in Japan, so it’s just my income. Wife is already 100% exempt from the Japanese pension and I’m 50% so paying ¥8000~ a month, plus the extra ¥11,000 or so a month for the U.K. pension (on top of other regular bills and health insurance etc) is pushing it.

Which should I prioritise? My wife’s U.K. pension, or our Tsumitate NISA (which I possibly can’t even max out each year)? (Not specifically directed at you, you just asking into the ether as a bit lost and overwhelmed right now

Class 2s for yourself is a good decision I think, class 3s for your wife would be great if you can afford it, but you are committing to at least ten years for her to qualify for any payment, so a fairly large commitment. You said she was 26, right? That gives her 42 years until her current projected retirement date and you only need to pay in for 35 to get maximum pension. So why not do class 2s for you now, contribute to NISA as much as you can, and see how things look in a few years time?