For companies employing Specified Skilled Workers and Registered Support Organizations assisting them, enrollment in Japan\u2019s social insurance system is an important practical responsibility. Foreign nationals who meet the applicable requirements are required to enroll in Employees\u2019 Pension Insurance, just like Japanese workers.<\/p>\n\n\n\n
But is it really enough simply to tell them, \u201cIf you work in Japan, you must enroll in the pension system\u201d?<\/p>\n\n\n\n
This question is particularly important for Specified Skilled Workers who work in Japan for several years and then return to their home countries.<\/p>\n\n\n\n
Some foreign workers may be able to combine their Japanese pension coverage period with the pension coverage period in their home country. Others cannot. In fact, many Specified Skilled Workers come from countries where such aggregation is currently unavailable.<\/p>\n\n\n\n
For this reason, Specified Skilled Organizations and Registered Support Organizations should explain not only the obligation to enroll in Japan\u2019s pension system, but also what foreign workers can do with their Japanese pension coverage when they eventually leave Japan.<\/p>\n\n\n\n
Japan has concluded social security agreements with a number of countries.<\/p>\n\n\n\n
These agreements generally serve two major purposes. One is to prevent workers from being required to pay social insurance contributions in both Japan and their home country at the same time. The other is to allow periods of pension coverage in Japan and the partner country to be aggregated when determining eligibility for pension benefits.<\/p>\n\n\n\n
However, the existence of a social security agreement does not necessarily mean that pension coverage periods can be aggregated.<\/p>\n\n\n\n
For example, Japan has social security agreements in force with the United Kingdom, South Korea, China, and Italy, but these agreements do not provide for the aggregation of pension coverage periods.<\/p>\n\n\n\n
Therefore, when explaining Japan\u2019s pension system to a foreign worker, it is not enough to say:<\/p>\n\n\n\n
\u201cJapan has a social security agreement with your country.\u201d<\/p>\n\n\n\n
The more important question is:<\/p>\n\n\n\n
\u201cCan the period during which you contributed to the Japanese pension system be counted when determining your eligibility for pension benefits in your home country?\u201d<\/p>\n\n\n\n
This distinction needs to be confirmed.<\/p>\n\n\n\n
It is also important to correctly understand what the aggregation of pension coverage periods means.<\/p>\n\n\n\n
Suppose, for example, that a person has participated in the Japanese pension system for five years and the pension system of their home country for seven years.<\/p>\n\n\n\n
Aggregation does not mean that the person will receive a single pension covering all 12 years from their home country.<\/p>\n\n\n\n
Rather, aggregation under a social security agreement means that periods of coverage in the other country may be taken into account when determining whether the person satisfies the minimum qualifying period for pension benefits.<\/p>\n\n\n\n
Even when aggregation allows a person to qualify for benefits, Japan generally pays a pension based on the period covered by the Japanese system, while the other country pays benefits based on the period covered by its own system.<\/p>\n\n\n\n
In other words, the key issue is whether the years spent working and contributing in Japan will become isolated after the worker returns home, or whether those years can contribute to future pension eligibility.<\/p>\n\n\n\n
This issue is particularly important under the Specified Skilled Worker system because many workers come from countries where Japanese pension coverage periods cannot currently be aggregated with their home-country pension coverage.<\/p>\n\n\n\n
Major examples include Vietnam, Indonesia, Myanmar, and Nepal.<\/p>\n\n\n\n
These countries are among the major sources of Specified Skilled Workers in Japan, but there is currently no social security agreement in force with Japan that enables pension coverage periods to be aggregated.<\/p>\n\n\n\n
The Philippines, on the other hand, has a social security agreement with Japan that provides for the aggregation of pension coverage periods.<\/p>\n\n\n\n
This means that even among Specified Skilled Workers, the future significance of their Japanese pension contributions differs depending on their country of origin.<\/p>\n\n\n\n
Rather than giving every foreign worker the same explanation, employers and support organizations should check whether a social security agreement exists with the worker\u2019s country and, more importantly, whether that agreement allows pension coverage periods to be aggregated.<\/p>\n\n\n\n
The total period of stay under Specified Skilled Worker (i) is generally limited to five years.<\/p>\n\n\n\n
Japan\u2019s old-age pension system generally requires a qualifying period of at least ten years. Therefore, a person who works in Japan only for five years under Specified Skilled Worker (i) and then returns home will normally not satisfy the ten-year requirement based solely on that period.<\/p>\n\n\n\n
If the worker\u2019s country does not have an arrangement allowing pension coverage periods to be aggregated with Japan, the worker also cannot combine their Japanese and home-country coverage periods to satisfy the eligibility requirement.<\/p>\n\n\n\n
This is where Japan\u2019s Lump-Sum Withdrawal Payment becomes particularly important.<\/p>\n\n\n\n
The Lump-Sum Withdrawal Payment is available, subject to certain conditions, to non-Japanese nationals who lose their coverage under Japan\u2019s public pension system and leave Japan.<\/p>\n\n\n\n
In April 2021, partly in response to the introduction of the Specified Skilled Worker system, the maximum coverage period used to calculate the Lump-Sum Withdrawal Payment was increased from 36 months to 60 months.<\/p>\n\n\n\n
The current system is therefore closely connected to the five-year maximum period applicable to Specified Skilled Worker (i).<\/p>\n\n\n\n
Consider a Specified Skilled Worker who earns approximately \u00a5250,000 per month, receives no bonus, and participates in Employees\u2019 Pension Insurance for five years.<\/p>\n\n\n\n
If we simplify the calculation by assuming a standard monthly remuneration of \u00a5260,000 and apply a payment rate of 5.5 for a coverage period of 60 months or more, the approximate Lump-Sum Withdrawal Payment would be:<\/p>\n\n\n\n
\u00a5260,000 \u00d7 5.5 = approximately \u00a51.43 million<\/strong><\/p>\n\n\n\n This is by no means a small amount.<\/p>\n\n\n\n The Employees\u2019 Pension Insurance contribution rate is 18.3%, of which employees generally bear half, or 9.15%.<\/p>\n\n\n\n Using the same assumptions, the employee\u2019s total contributions over five years would be approximately:<\/p>\n\n\n\n \u00a5260,000 \u00d7 9.15% \u00d7 60 months = approximately \u00a51.427 million<\/strong><\/p>\n\n\n\n Under this simplified example, the worker\u2019s total pension contributions over five years and the Lump-Sum Withdrawal Payment are roughly similar in amount.<\/p>\n\n\n\n Of course, the actual payment depends on factors such as standard monthly remuneration, bonuses, and the period of coverage. Employees\u2019 Pension Insurance also provides insurance protection through disability and survivors\u2019 benefits in addition to old-age pensions, so the Lump-Sum Withdrawal Payment should not be regarded simply as a refund of contributions.<\/p>\n\n\n\n Nevertheless, workers should not return to their home countries without knowing about a system that could potentially provide them with more than one million yen.<\/p>\n\n\n\n It is necessary to tell Specified Skilled Workers that they must enroll in social insurance when they work in Japan and meet the applicable requirements.<\/p>\n\n\n\n However, if we explain their obligations, we should also explain the rights and benefits arising from the same system.<\/p>\n\n\n\n For workers returning to countries where Japanese pension coverage cannot be aggregated with their home-country pension coverage, the question of what happens to several years of Japanese pension contributions is particularly significant.<\/p>\n\n\n\n If a worker could have claimed a Lump-Sum Withdrawal Payment after leaving Japan but loses the opportunity because they were unaware of the system and missed the application deadline, the financial disadvantage could be substantial.<\/p>\n\n\n\n If Japan requires foreign workers to bear the costs of its social insurance system, it should also ensure that they understand the benefits available to them and can actually exercise their rights.<\/p>\n\n\n\n This should not merely be regarded as an act of kindness. It is an important element of properly administering a system that accepts foreign workers.<\/p>\n\n\n\n Leaving Japan does not mean that a foreign worker can no longer apply for the Lump-Sum Withdrawal Payment.<\/p>\n\n\n\n Subject to the applicable requirements, an application can generally be submitted to the Japan Pension Service within two years from the date on which the person ceases to have an address in Japan.<\/p>\n\n\n\n The worker may submit the necessary documents from overseas and, if the requirements are satisfied, receive the payment in a bank account held in their own name overseas.<\/p>\n\n\n\n Before returning home, workers should therefore understand at least the following points:<\/p>\n\n\n\n Income tax and other applicable taxes are withheld at source when a Lump-Sum Withdrawal Payment from Employees\u2019 Pension Insurance is paid.<\/p>\n\n\n\n For example, if 20.42% were withheld from a payment of approximately \u00a51.43 million, approximately \u00a5290,000 would initially be deducted.<\/p>\n\n\n\n However, the amount withheld is not necessarily the worker\u2019s final tax liability. Depending on the circumstances, the worker may be able to settle the tax through a Japanese tax return and receive a refund.<\/p>\n\n\n\n It can therefore be useful to provide information about the necessary tax procedures after departure and, where appropriate, the appointment of a tax representative in Japan.<\/p>\n\n\n\n Simply explaining the Lump-Sum Withdrawal Payment without explaining the tax withheld from it and the possible subsequent tax adjustment may prevent workers from making full use of the system.<\/p>\n\n\n\n This is one of the most important points.<\/p>\n\n\n\n The Lump-Sum Withdrawal Payment should not simply be described as \u201cmoney foreign workers can receive when they return home.\u201d<\/p>\n\n\n\n Once a person receives the Lump-Sum Withdrawal Payment, the Japanese pension coverage period used in calculating that payment can no longer be used toward future Japanese pension eligibility.<\/p>\n\n\n\n For example, if someone contributed to the Japanese pension system for five years and then received the Lump-Sum Withdrawal Payment, those five years can no longer be used toward their future eligibility for a Japanese old-age pension.<\/p>\n\n\n\n For people who may return to Japan and work again, people whose Japanese pension coverage is already approaching ten years, or people who can aggregate Japanese and home-country pension coverage under a social security agreement, it may be more appropriate to preserve their Japanese coverage period rather than claim the Lump-Sum Withdrawal Payment.<\/p>\n\n\n\n Therefore, Specified Skilled Organizations and Registered Support Organizations should not uniformly advise every departing foreign worker to claim the payment.<\/p>\n\n\n\n In practice, it may be useful to divide departing Specified Skilled Workers into at least three categories.<\/p>\n\n\n\n 1. Workers whose Japanese pension period can be aggregated with their home-country pension period<\/strong><\/p>\n\n\n\n Explain both options: claiming the Lump-Sum Withdrawal Payment or preserving the Japanese coverage period for future pension eligibility. The worker should be given sufficient information to make an informed decision.<\/p>\n\n\n\n 2. Workers whose Japanese pension period cannot be aggregated with their home-country pension period<\/strong><\/p>\n\n\n\n After confirming their Japanese coverage period and whether they may return to Japan in the future, explain the Lump-Sum Withdrawal Payment in detail, including the application procedure, deadline, and tax treatment.<\/p>\n\n\n\n 3. Workers who are approaching Japan\u2019s ten-year pension qualifying period<\/strong><\/p>\n\n\n\n Their complete Japanese pension history should be reviewed, including periods under the Technical Intern Training Program, employment while studying, Specified Skilled Worker status, and other work-related statuses of residence.<\/p>\n\n\n\n Because claiming the Lump-Sum Withdrawal Payment may affect their future eligibility for an old-age pension, particularly careful explanation is required.<\/p>\n\n\n\n Specified Skilled Organizations and Registered Support Organizations may wish to include the following items in their support checklist when a foreign worker is preparing to leave Japan:<\/p>\n\n\n\n Specified Skilled Workers, as members of Japanese society, are required to properly pay taxes and social insurance contributions.<\/p>\n\n\n\n But social integration should not mean imposing obligations on foreign residents alone.<\/p>\n\n\n\n If we tell foreign workers, \u201cYou must enroll in Employees\u2019 Pension Insurance,\u201d we should also explain what rights their contributions may create, whether their Japanese coverage can be connected to their home-country pension system, and, where it cannot, whether the Lump-Sum Withdrawal Payment may be an option.<\/p>\n\n\n\n Workers should then be able to make their own decisions based on their future plans.<\/p>\n\n\n\n This is particularly important under the Specified Skilled Worker system because many workers come from countries where Japanese pension coverage periods cannot currently be aggregated.<\/p>\n\n\n\n Foreign workers should fulfill their obligations, but they should also receive practical support that enables them to exercise the rights arising from the same system.<\/p>\n\n\n\n For Specified Skilled Organizations and Registered Support Organizations, support should therefore not end once a worker has been enrolled in the pension system.<\/p>\n\n\n\n It should also address the question:<\/p>\n\n\n\n \u201cWhat will happen to this worker\u2019s pension when they leave Japan?\u201d<\/strong><\/p>\n\n\n\nIs It Appropriate to Explain the \u201cObligation to Pay\u201d but Not the \u201cRight to Receive\u201d?<\/h2>\n\n\n\n
The Lump-Sum Withdrawal Payment Can Be Claimed from Overseas<\/h2>\n\n\n\n
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Taxation of the Employees\u2019 Pension Lump-Sum Withdrawal Payment Must Also Be Explained<\/h2>\n\n\n\n
However, the Lump-Sum Withdrawal Payment Should Not Be Recommended to Everyone<\/h2>\n\n\n\n
Three Points to Consider Before a Worker Returns Home<\/h2>\n\n\n\n
Add a \u201cPension Exit Strategy\u201d to Your Return-Support Checklist<\/h2>\n\n\n\n
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From \u201cHelping Foreign Workers Pay\u201d to \u201cHelping Them Access the System\u201d<\/h2>\n\n\n\n
Japan\/World Immigration News<\/h2>\n\n\n