# pension refund



## helloworld232

For the last 2 years, I've been contributing 50000yen to my welfare pension every month. How much would I get back from my pension refund when i leave Japan?

would I get back 100% what I contributed, so (50000*24)= 120,000? (including the %20 tax return).


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## larabell

From what I've read (which you could also look up on the web), the computation depends on your average monthly salary, how many months you paid in, and which pension system you were paying into. It doesn't look like it's based on what you ended up paying into the system so I'm willing to bet that what you get back is not exactly 100%. They will deduct 20% from the payment for taxes but it seems you can get that refunded if you designate a tax agent in Japan who can file the paperwork and receive the money. There are companies that specialize in both pension refunds and the associated tax refunds -- for a fee, of course. Your employer might be willing to be your tax agent and help you file for the tax refund. Or, I don't see anything that says it can't just be someone you know well who is still in Japan and might do it for nothing.

The whole thing seems pretty complex to me.

By the way... if you're returning to a country that has a totalization treaty with Japan for pension qualification, applying for a refund also means those years will not count toward qualification for retirement in your home country. That might not matter if you're young and planning to work forever, anyway; but someone closer to retirement age might want to think through the ramifications before requesting the refund.


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## BBCWatcher

The totalization agreements are a bit more than that. They also mean that you can count foreign (non-Japanese) contribution histories in social security treaty countries to qualify for Japanese retirement benefits. (And yes, you can typically collect from both "sides" when the time comes if you qualify.) So if you withdraw the funds from the Japanese system you might also be terminating your ability to enjoy future Japanese social security retirement benefits (and survivors benefits, meaning your opposite sex spouse can continue enjoying at least some of your benefits if you predecease him/her). It's a good point Larabell raised and one well worth checking.

That said, Japanese social security benefits are not particularly generous. However, if you're going to be paying tax anyway (and not getting back 100%), then maybe staying "in" is the better option, assuming you've got some treaty country contributions to count. Regardless, you have a limited period of time to make a decision, so it's a good time now to consider your options.


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## larabell

You're right that the treaty is symmetrical (ie: works both ways). But since one can only apply for the refund after having left Japan, I was assuming that retirement in Japan wasn't in the cards, at least in this case. In the event the OP does choose to return to Japan at some point, time spent qualifying for benefits in his home country (post-refund) would still count but the refunded years would not. Other than the difference in benefit amounts, I'm not sure that's significantly different from the scenario of simply leaving and never coming back. The bottom line is that requesting a refund for those two years probably means having to work two extra years before qualifying for retirement benefits, regardless of where he ultimately decides to retire [1].

I'm curious, though, about your suggestion that one could claim benefits from both Japan and one's home country at the same time. Being not so far off from having that option, I've googled that question on a number of occasions and haven't seen any definitive information either way. It would make more sense (from the governments' POV) that the same treaty that allows for totalization of qualifying payments would also prohibit duplicate payments or, at least, deduct payments from one side when computing benefits from the other. If you know of a reference to the contrary, I'd be very interested.

[1] The negative effect of a refund obviously doesn't apply to someone from a country that doesn't have a totalization treaty with Japan. In that case, those payments don't apply anyway so might as well grab the money and run .


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## BBCWatcher

You can collect from any/all countries that will pay you social security benefits, according to each country's terms including treaty obligations. Whether and how a particular country adjusts its benefit amounts and/or taxation of benefits depends on that country, too. The United States, for example, has something called the "Windfall Elimination Provision" (WEP) that can sometimes reduce U.S. benefit amounts if you're collecting foreign amounts, but the WEP reduction is always much less than one for one.


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## BBCWatcher

Let's see if we can be a little more specific here. I'm going to assume (from the flag) that Helloworld232 is from Canada and has or will be (or both) contributing to the Canadian social insurance system. Canada and Japan indeed have a social security totalization agreement, so that means that, if Helloworld232 chooses to let those contributions made in Japan stay in Japan, the Japanese system can count his/her contributions into the Canadian system in order to meet the minimum number of contribution months required in the Japanese system to qualify for a retirement benefit. That's described in Article 7 of the treaty. The benefit would then be calculated on more or less a pro-rated basis since the total Japanese contributions are presumably fairly small. But a "small" future monthly benefit would presumably be payable.

So this is an "interesting question," worthy of further investigation certainly. Does it make sense to take a partial refund now (factoring in the losses due to taxes and fees), or does it make more sense to receive a future retirement benefit from Japan? (Note: Neither residence in Japan nor Japanese citizenship are requirements to receive the entitled Japanese benefit.)

Note that Japan requires a minimum of 300 months of contributions to qualify for benefits, _inclusive_ of contributions to treaty countries' systems (such as Canada's system) -- you have to hit 300 months total (Japan plus treaty countries), i.e. 25 years. However, under present law that 300 months requirement is scheduled to drop to 120 months -- no promises particularly since that change has been delayed already, but that's the current plan. Another factor to consider is that you can only get a maximum of 36 months of Japanese contributions refunded. If you've been contributing in Japan longer than that, your partial refund will be even more partial because you lose everything except the last 36 months (and lose taxes and any fees paid on those 36 months). And note that withdrawal of contributions from the Japanese system means those months/years cannot be counted to qualify for benefits under the Canadian Pension Plan if you don't end up with enough years of contributions into that system. For example, if you're Canadian, have some years of Canadian contributions, but don't have enough in Canada to qualify for benefits there (based only on Canadian contributions) and are now moving onto, say, Uganda (definitely not a social security treaty country), then withdrawing your Japanese contributions could also mean you end up without any Canadian benefits. It depends on your particular situation.

Anyway, this is not necessarily an _easy_ decision if you're from and/or headed to a social security treaty country such as Canada. It might be worth keeping that guaranteed Japanese joint/survivors government retirement annuity that you've just purchased instead of taking the refund. It's definitely something to look into more fully.

It's a really good point you raised.


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## larabell

There's got to be a fly in this ointment somewhere. For example, I'm not a Canadian citizen, nor have I ever lived or worked in Canada. But, by your logic, I should be able to use a combination of my US work history and my Japanese work history to claim retirement payments from Canada (not to mention any number of other countries as well). Clearly, that's not likely to work or everyone would start doing it and the loophole would close almost immediately.

Here's something that may be pertinent. From nenkin.go.jp: "Please note that it is not that your totalization benefit amounts will be paid from one country. Rather, each country respectively calculates your totalization benefits in proportion to your coverage period under each country's system, and pays the benefits of that country to you separately."

While there are no specific examples corresponding to this statement, what it seems to be saying is that if you have 300 months total between the two countries and are, therefore, eligible for benefits, the benefits payable from Japan would be 2/300 of the usual benefit if you only spent 2 years in Japan (or some similar computation). That would seem more plausible. If that's the case, then I'd have to have worked at least one month in Canada to get anything from them on retirement so the apparent "loophole" wouldn't exist.

But I don't see anything similar on the US Social Security website... other than the WEP reduction, which you've already mentioned. But I *did* find something that says that the WEP reduction is never more than 50% of one's foreign pension so that means double-collecting could be a good thing overall... assuming you've put in enough months in Japan to make the Japanese payment worth going through the paperwork hassle.

On the other hand, computing payments proportionally like that would put those from either country who only spend a few years out of their home country at a considerable disadvantage since they would have to apply in both places in order to receive 100% of what they have coming. So it's probably even more complex than that. Still... there has to be some provision that stops me from claiming benefits from every country that has a totalization treaty with the US, even those countries in which I never worked a day.

BTW, the OP already mentioned having worked in Japan for only two years so the 36 month limit wouldn't apply in this case. But that's a valid point to consider for anyone else (like myself) who may have been working here much longer than that.


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## BBCWatcher

larabell said:


> There's got to be a fly in this ointment somewhere. For example, I'm not a Canadian citizen, nor have I ever lived or worked in Canada. But, by your logic, I should be able to use a combination of my US work history and my Japanese work history to claim retirement payments from Canada (not to mention any number of other countries as well).


There is a fly in that ointment, and I think I mentioned it. You still need to hit a new, lower "treaty minimum" of contributions within a particular system. As one example that I happen to know off hand, the U.S. treaty minimum is non-trivial contributions to the U.S. Social Security system within any two calendar years. (Hypothetically that could be as little as two days spent working with U.S. contributions as long as those two days cross two calendar years, and as long as the contributions were high enough, i.e. the income was high enough. A highly compensated performing artist who has two quick concerts in the United States could qualify, hypothetically.) If you hit the treaty minimum, then you can qualify for that country's benefits if treaty totalization allows. However, that country's benefits will be pro-rated. If you've made, say, US$6,000 total of contributions into the U.S. system then your future U.S. Social Security retirement benefit isn't going to be very much.

In other words, the treaty reduces the "vesting" period required. Ordinarily it's 25 years (under present law) to "vest" in the Japanese system (and 10 years for the U.S. as another example). But you still need to hit a treaty minimum in Japan. I'm not precisely sure what the Japanese treaty minimum is, but it's usually on the order of a couple years. If you haven't hit the treaty minimum, then yes, absolutely you'll want to claim your partial refund of contributions if possible -- or "top up" those contributions with further voluntary contributions if you're allowed to do so to hit the treaty minimum. (Japan may allow that. The U.S. does not.)



> While there are no specific examples corresponding to this statement, what it seems to be saying is that if you have 300 months total between the two countries and are, therefore, eligible for benefits, the benefits payable from Japan would be 2/300 of the usual benefit if you only spent 2 years in Japan (or some similar computation).


Yes, _conceptually_ you're correct, but it would be 24/300 since the 300 refers to months, not years. And the calculation can be a bit more complicated than that, but that's the basic idea.

Very, very roughly the maximum Japanese retirement benefit, in present yen, is on the order of 780,000 yen last time I checked. (The number had a 7 in front and was six digits long -- I remember that at least.) So if the calculation is a simple, linear pro-rated calculation then, in your example, 24/300ths would be 62,400 yen per year or 5,200 yen per month -- just shy of US$44 per month at the exchange rates as I write this. That's not a huge amount of money to most people, but it's not zero, and some money is better than none.

Said another way, the pro-rated benefit based on zero contributions into Luxembourg's social security system (to pick a random, unlikely example) is...still zero. It's at least much harder to collect retirement benefits when you didn't pay anything into a particular country's system. Zero multiplied by zero months/years is very much zero.



> But I don't see anything similar on the US Social Security website... other than the WEP reduction, which you've already mentioned. But I *did* find something that says that the WEP reduction is never more than 50% of one's foreign pension so that means double-collecting could be a good thing overall...


Yes, it's a very good idea to collect something rather than nothing. Note that the WEP reduction only applies when you're not contributing to the U.S. system and you're receiving benefits from a foreign system (treaty or otherwise) based on the period you sat out of the U.S. system. It is possible in some circumstances to work in Japan (or in other countries) and still be contributing to the U.S. system, or to be contributing to both systems. The social security treaties also often decide which country's system receives contributions.



> On the other hand, computing payments proportionally like that would put those from either country who only spend a few years out of their home country at a considerable disadvantage since they would have to apply in both places in order to receive 100% of what they have coming.


Not really. The U.S. Social Security system, for example, considers only your top 30 earning years when calculating retirement benefits. If you had 30 great years and also spent a couple years working in Japan (for example), perhaps in your youth when you wouldn't have had a top earning year anyway, no problem. You'll still qualify for 100% of your U.S. benefit (and a high one at that if they were great earning years) plus a modest Japanese benefit, perhaps with a slight WEP reduction on the U.S. side but still better than not having a treaty and/or not having spent time in Japan. The WEP reduction only applies if/when you receive foreign benefits, but it's still better to receive your entitled benefits.

I'm hard pressed to think of situations when these treaties are bad for beneficiaries.


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