Lump-sum Withdrawal Payments or Old Age Pension – under what conditions can you choose it?
Non-Japanese employees can choose to receive “Lump-sum Withdrawal Payments (脱退一時金, Lump-sum pension refunds)” or “Old Age Pension(老齢年金)” under the full conditions of the following (1), (2), and (3):
(1) Paying Japanese pensions (Kosei Nenkin /Kokumin Nenkin) for 6 months or more
(2) Paying Japanese pensions for less than 10 years
(3) Having a record of pension systems in countries that have Social Security Agreements with Japan.
For condition (1), you need to pay Japanese pensions by yourself or through employers. Students and dependent spouses are also registered in Japanese pensions (Kokumin Nenkin), but they don’t have a responsibility to pay any contributions. If no record to pay contributions, they don’t have a qualification to claim “Lump-sum Withdrawal Payments”.
For condition (2), persons paying Japanese pensions for 10 years or more take a qualification to receive “Old Age Pension”, but instead lose a qualification to claim “Lump-sum Withdrawal Payments”.
For condition (3), pension record(s) in counties in this blog’s table (but only “Yes” in Totalization of Periods of Coverage) give you a qualification to claim “Old Age Pension” even with contributions for less than 10 years. Pension systems of United Kingdom, South Korea, People’s Republic of China and Italy, though, don’t give you a qualification.
If you fill conditions of all (1) (2) and (3), then basically your can choose to receive “Lump-sum Withdrawal Payments” or “Old Age Pension”. (*)
(*) Please note that it is ’basically’ and it is possible that you can only choose either one if you have other conditions such as you are a Permanent Resident in Japan.
Lump-sum Withdrawal Payments or Old Age Pension – which is more advantageous?
Then which of the two is more advantageous for you?
- Lump-sum Withdrawal Payments
* You can claim them within 2 years after leaving Japan.
* Maximum amount of their payback is 5 year’s contributions [if you pay contributions after April 2021] / 3 year’s contributions [if you end to pay contribution in March 2021 or before]
* Even if you take them, you can claim them again after you resume an employment in Japan.
* Their income tax is set to 20% but almost all of it can be refunded if it is appropriately claimed.
- Old Age Pension
* You can claim it when you get 65 years old. To do so you need to submit a certificate of a pension record in countries that have Social Security Agreements with Japan.
* In order to continue receiving it year after year, you need to submit a certificate once a year in order to prove that you are alive and report where you reside.
* Its income tax is also set to 20% as long as you live outside Japan, but you can submit a form to give you an exemption from a taxation by Japanese government under the condition that you reside in a county that has a treaty regarding tax payments with Japan (租税条約).
Let us take an example of a non-Japanese employee whose average monthly salary is 500,000yen, and who have been employed for 5 years by the middle of year 2021:
If “Lump-sum Withdrawal Payments”
— app. 2,750,000yen (before tax, paid at once, within 2 years after leaving Japan)
If “Old Age Pension”
— app. 261,000yen / 1 year (before tax, 1/6 of it paid once every 2 months, from 65 years old)
We hope you to make your decision taking this info into account.
For Detailed Information..
- List of International Social Security Agreements (YouAT LLC Website)
- How the amount of Pension Refund is calculated (YouAT LLC Website)
YouAT LLC gives you services for Japanese pension and tax refunds
We YouAT LLC has more than 10 year’s history to support non-Japanese employees’ “Lump-sum Withdrawal Payments”, “Old Age Pension”, and income tax refunds.
We have staff of Labor and Social Security Attorney, Administrative Scrivener, and Tax Accountant.
YouAT LLC website — > www.youat-jp.com/
Email –> firstname.lastname@example.org
(Oda Mitsuo, YouAT LLC)