How will pension systems change with 2025’s reforms?

By | 01/12/2023

2025’s pension systems reforms

Every 5 years Japanese government reforms its pension systems in accordance with developments of its society and economy. The next reforms will come in year 2025.
Ministry of Health, Labor and Welfare (厚生労働省) has already submitted its own 2025 reforms plan. It will be discussed at Japanese Diets (国会) throughout year 2024, and the reformed pension laws are to be implemented in year 2025.

As of December 2023 Japanese Diets have not yet taken issues about pension reforms. So please note that the following reforms plan is NOT YET IMPLEMENTED BY LAWS.
Now let’s take up two important points in the reforms plan.

Reforms Plan 1: Possible extension of Kokumin Nenkin’s contribution period

Kokumin Nenkin (国民年金) is one of Japanese pension systems that covers all Japanese adult residents except for employees. Employees in private companies are instead covered by Kosei Nenkin (厚生年金) instead, and employees in public offices and schools are covered by Kyosai Kumiai (共済組合). They are covered by other pension systems than Kokumin Nenkin.

Under the present pension law citizens who are covered by Kokumin Nenknin need to pay contributions by their 60 year’s birthday.
In November 2023 Ministry of Health, Labor and Welfare took up a suggestion to extend Kokumin Nenkin’s contributions by 5 years to 65 year’s birthday. Japanese government is expected to follow this suggestion and submit a bill to reform Kokumin Nenkin to extend contribution period, possibly next year’s Diets.

The reason why contribution period is planned to be longer is the shrinking proportion of Japanese younger citizens compared with aged citizens. So the government aims to collect contributions from a wider range of population, including not-so-much-aged citizens.

Reforms Plan 2: Kosen Nenkin covers short-time employees

Under the present pension law employees whose annual salary is less than 1,060,000yen / 1,300,000yen (in case employed by small size companies) are not covered by Kosei Nenkin but Kokumin Nenkin. If their partner is covered by Kosei Nenkin (that is, employees in a private company), then they are regarded as “Category III insured persons” (*).

Although no clear evidence, some internet news report that 2025 reforms will make Kosei Nenkin cover employees whose annual salary is much lees, say, 700,000yen or so. If it is really implemented, then a large number of short-time employees will get out of Kokumin Nenkin’s coverage and get covered by Kosei Nenkin. That means lots of Japanese housewives who work as a short-time employees now (in order to keep Category III status) will be forced to contribute Kosei Nenkin.

However, such a reform will put a burden to not only short-time employees like housewives but also employers (**), so it is expected to face strong objections against the plan.

As of December 2023, the future of the enlargement of Kosei Nenkin to short-time employees is uncertain.

(*) Category III insured persons will get a qualification to receive Japanese old age pension after they are insured over 10 years, without paying contributions by themselves. For details see this article of our blog.

(**) Because half of Kosei Nenkin is paid by employees, and other half is by employers.

How reforms can effect non-Japanese citizens

How will 2025 pension reforms influence non-Japanese citizens if they are implement as planned?

  • Now a large part of non-Japanese residents are employees with working visas. They are covered by Kosei Nenkin, whose final contribution date is the birthday of 70 years old already. So even if Kokumin Nenkin’s contribution period gets longer to 65 years old, there will be no more change for them (except for permanent/long-term residents who reside in Japan without employment).
  • If a non-Japanese partner is now working as a short-time employees, then it is possible that he/she will be covered by Kosei Nenkin and need to start paying contributions. But non-Japanese are permitted to claim Lump-sum Withdrawal Payments (pension refund) of contributed Kosei Nenkin after they leave Japan. So please note that contributions can be claimed to pay back.

For Detailed Information..

  • About pension reform plan (Ministry of Health, Labor and Welfare: Japanese language only)
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