The Japanese state pension has two layers. Everyone aged 20 to 59 belongs to the flat-rate national pension. Employees are also enrolled in kosei nenkin, which adds an earnings-related pension on top, and their contributions cover both layers. Employees stay enrolled up to age 70 while working.
The rate is 18.3% of the standard monthly remuneration and of bonuses, half paid by each side. Monthly remuneration is capped at 650,000 yen and each bonus at 1.5 million yen, so anyone whose monthly pay is above about 635,000 yen pays a flat amount. Under the 2025 pension reform, the monthly cap rises to 680,000 yen in September 2027, 710,000 yen in September 2028 and 750,000 yen in September 2029.
The reform also widens coverage of part-time workers by removing the earnings threshold and phasing out the employer-size threshold by 2035. Separately, from April 2026 people drawing a pension while still working lose part of it only once pay and pension together exceed 620,000 yen a month, up from about 510,000 yen.
What it means for a foreign employer
- The cap matters for senior hires. Above the cap, the employer's pension cost is fixed, which makes it a small share of a senior package. That share will grow from 2027.
- Foreign staff who leave can claim some back. Non-Japanese who leave Japan can claim a lump-sum withdrawal payment covering up to five years of contributions, unless a totalisation agreement gives them a better route. A 2025 amendment raises the cap to eight years from a date still to be set by cabinet order.
- Check for an agreement before seconding staff. Japan has agreements with 24 countries that prevent double contributions for short assignments.
- Older employees can work longer at less pension cost to themselves. The higher threshold from April 2026 makes re-employed senior staff less sensitive to pay levels.
Sources
- Employees' Pension Insurance Act, Articles 20, 24-4 and 81.
- Act Partially Amending the National Pension Act and Related Acts, enacted June 2025.
- Japan Pension Service, guidance on the lump-sum withdrawal payment and the in-service pension adjustment from April 2026.