Retirement in Japan might not be the most stimulating topic, but if you are living and working here, you should understand what you will get out of the system when retirement comes.
The pension system in Japan is a three-tier system. The following gives an overview of each: how the system works, the required level of contributions, and the expected level of payouts.
The basic state pension is called kokumin-nenkin (国民年金). All residents in Japan aged between 20 and 59 are obliged to pay into the national pension scheme (with some exceptions, such as for students). Monthly payment amounts are adjusted annually; for the 2026 fiscal year, the monthly premium is ¥17,920 (Japan Pension Service).
A significant hurdle for international residents is the 10-year contribution requirement. You must have contributed for at least 10 years to be eligible for a pension at age 65. However, if you leave Japan before reaching this milestone, you may be eligible for a Lump-sum Withdrawal Payment (datsutai-ichijikin).
To claim the lump-sum, you must be a non-Japanese national, have contributed for at least 6 months, and apply within two years of leaving Japan. Crucially, as of April 2021, the maximum payout period was increased from 36 months to 60 months (5 years), allowing you to recoup a much larger portion of your premiums.
Crucial Warning for Permanent Residents: Generally, holders of Permanent Residency (PR) are ineligible for the lump-sum withdrawal. The government views PR as a commitment to stay in Japan for life. If you intend to take your pension as a lump sum, you must do so before changing your status to PR or renouncing your residency upon departure.
If you have a low income, are a student, or are a single parent, you can apply for a contribution exemption (full, 3/4, 1/2, or 1/4) or a postponement at your municipal office. These approved periods are vital because they still count toward the 10-year eligibility requirement, though the final payout amount will be reduced unless you “buy back” (retroactively pay) those years within 10 years.
Japan has bilateral Social Security Agreements with 24 countries (including the US, UK, Australia, Canada, and most recently Austria). These allow you to “totalize” your years, meaning years worked back home can help you reach the 10-year minimum in Japan. Note, however, that agreements with the UK, South Korea, China, and Italy currently only cover the elimination of dual coverage and do not allow for the totalization of years.
While contributions stop at 60, you generally cannot claim the pension until age 65. For Fiscal Year 2026, the maximum annual payment for a full 40-year contribution history is approximately ¥847,300 (roughly ¥70,600 per month).
¥847,300 x (total months of contributions) / 480
This tier, known as kōsei-nenkin (厚生年金), covers most company employees. Tier 2 contributions are salary-based, currently set at a flat rate of 18.3% of your monthly income. This cost is split 50/50 between you and your employer, so roughly 9.15% is deducted from your paycheck. This premium includes your Tier 1 contribution, so you do not need to pay the National Pension separately.
The Tier 2 payout is added on top of your Tier 1 basic pension. A rough estimate for this portion is:
0.55% x (average annual salary) x (no. of years in employment)
If you worked for 40 years with an average salary of ¥6 million, your Tier 2 payout would be approximately ¥1.32 million per year, bringing your total annual pension (Tier 1 + Tier 2) to over ¥2.1 million.
The third tier covers supplemental plans like Corporate DC/DB plans. Many residents also use voluntary schemes like iDeCo (Individual Defined Contribution) or the New NISA (launched in 2024) to bridge the gap. iDeCo is particularly powerful for retirement as contributions are 100% tax-deductible.