Employees who work for a company may be interested in knowing how much pension they will receive in the future through their workplace welfare pension system. The welfare pension can be received from the age of 65 onwards, and there is a special provision known as the “44-year exception” that allows for early pension benefits in certain cases. This article by Yoshitaka Nakagawa from Japan Classe Tax Corporation provides an overview of the “44-year exception” of the welfare pension system, explaining the conditions and benefits of this provision. It also offers advice on tax filing support and considerations for utilizing this special provision based on individual circumstances.
Employees working for a company may be curious about how much pension they will receive in the future if they are enrolled in the workplace’s welfare pension system. The welfare pension can generally be received starting at the age of 65. If you have worked for a company for a long time, you may be able to receive pension early after retirement. In this case, there is a special welfare pension called the “44-year exception” that allows you to receive an additional amount on top of the normal amount.
Therefore, in this article, Mr. Yoshitaka Nakagawa from Nihon Class Tax Corporation will introduce the overview and points to note about the welfare pension’s “44-year exception” based on his knowledge and experience. You can receive support for tax returns over many years.
Table of Contents
What is the “44-year exception” of the welfare pension?
What are the conditions and provisions of the “44-year exception” of the welfare pension?
How much does the pension increase with the “44-year exception”?
What are the drawbacks and points to note of the “44-year exception”?
Generalizing
What is the “44-year exception” of the welfare pension?
The system in which a person who has been enrolled in the welfare pension insurance for 44 years or more and reaches a certain age can receive special payments of old-age welfare pension (proportional to salary) before becoming a non-insured person due to retirement is called the “44-year exception”. The system to receive parts of the salary from abroad is collectively referred to as the “44-year exception”.
In this case, you can start receiving a fixed amount from the month after you stop the insurance. In other words, thanks to the special provision in place since 1944, people who are enrolled in the welfare pension and receive special payments of old-age welfare pension salary proportionally can retire before the age of 65. At this time, you may also receive a fixed amount as a non-insured elderly national pension beneficiary, which may be considered an increase.
Moreover, if there are eligible recipients for additional pension (children or spouses), the “Application for Commencement of Increased Old-age Pension/Retirement Pension Additional Pension Amount” for the next month can be submitted. You can claim the additional pension for 10 minutes from the month you become a non-insured person.
Special Allowance
From 2024, the starting age for receiving basic pension (national pension) and old-age welfare pension will be 65, and those who meet certain conditions can receive a special allowance from the ages of 60 to 64.
By using the special contribution system, you can start receiving the welfare pension from the age of 60. Therefore, the financial impact can be reduced.
This special payment consists of a fixed amount equivalent to the basic pension and a salary proportionate part equivalent to the old-age benefit pension salary.
Annual Addition
Spouses who can support their livelihood at the age of 65 (or the age when the amount of the fixed part starts to be paid) by having been enrolled in the welfare pension insurance for 20 years or more (※). They have children.
After reaching the age of 65 (or after reaching the age when the fixed part payment starts), if the insurance period exceeds 20 years (※), the fixed-term employment period changes, the retirement period changes (or after reaching the age of 65), and if you have over 70 years and those who are dependent on your livelihood such as your spouse or children, this will be added to you.
Alternatively, the insurance period of the welfare pension, excluding the period of enrollment in mutual aid associations, is 15 to 19 years from the age of 40 (women, mine workers, and seafarers have 35 years).
What are the provisions and conditions of the “44-year exception” of the welfare pension?
Conditions and notifications necessary to receive the 44-year special deduction are as follows.
Members are aged 44 or older
During the period of enrollment in the welfare pension insurance, enrollment period in the welfare pension insurance or private school mutual aid associations operated by the Japan Pension Service, or enrollment period in the welfare pension insurance or private school mutual aid associations takes precedence, as well as enrollment periods in the private school mutual aid associations are for 44 years or more (these periods do not run continuously).
Conditions to receive payment
- Men born before April 1, 1963
- Women born before April 1, 1960
- Pension receiving period (10 years)
- Enrollment in the welfare pension insurance for at least 1 year.
Starting age for receiving benefits determined by date of birth.
Regarding the submission of notification
After the recipient has retired, the company will submit a certificate of loss of insurance qualification to the pension office and proceed with the procedures related to this special arrangement. Therefore, the recipient does not need to submit a notification to receive the fixed part.
How much does the pension increase with the “44-year exception”?
The increase amount due to the 44-year exception is the total amount of the “fixed part” and the “salary proportional part” as follows.
Fixed part
The fixed part is the calculation basis for the special old-age benefit pension and varies depending on the enrollment period for pension benefits.
[Calculation formula for the fixed amount part (from April 2020)]
- For those born after April 2, 1955
1,701 yen x date of birth x number of insurance period months
- For those born before April 1, 1955
1,696 yen x date of birth fee x number of insurance period months
The maximum number of months of guaranteed coverage varies by birthdate:
- For those born between April 2, 1930, and April 1, 1944, the months are 444.
- For those born between April 2, 1944, and April 1, 1945, the months are 456.
- For those born after April 2, 1945, the months are 468.
For those born after April 2, 1945, the months are 480.
Salary proportional part
The salary part is the calculation basis for the old-age welfare pension, disability welfare pension, and survivor’s pension, and is determined based on the number of years of pension contributions and past salaries.
The calculation method is as follows:
Salary proportion = A + B
A: Period of participation before March 2003
Average standard salary per month※1 x 7.125/1,000 x number of months of participation as of March 2003
B: period of participation after April 2003
Average standard salary amount※2 x 5.481/1,000 x number of months of enrollment period after April 2003
Note: ※ Prior amount
If the amount calculated by the above formula is less than the previous amount, the previous amount is considered as the salary proportion amount (hereinafter referred to as the calculation formula).
(Average standard salary per month x 1 x 7.5/1000 x number of months of enrollment before March 2003 + Average standard salary amount x 2 x 5.769/1000 x number of months of enrollment after April 2003) x 1.041
※1 For the period of participation before March 2003, it is the total amount of the standard salary per month for each month divided by the number of months of enrollment before March 2003.
※2 For the period of participation after April 2003, it is the total amount of the standard basic salary per month and the standard bonus amount divided by the number of months of participation after April 2003.
What are the drawbacks and points to note of the “44-year exception”?
If you have a certain income, you cannot use the 44-year exception. Specifically, if the monthly income is 88,000 yen, you cannot apply, and you will be asked to choose between using the 44-year special deduction to retire or continue working. If your income is stable, it may be more beneficial to continue working until the age of 65 rather than using this exception to maximize your net income.
Generalizing
The 1944 exception system was designed to alleviate the financial burden of special welfare payments and raise the age of receiving benefits to 65. By receiving a fixed amount of special pension that would not normally be received earlier, there is a potential for increased financial security.
However, if you continue working until age 65 without retiring, you may earn significantly more income than when using the special deduction. It is recommended to carefully consider and tailor this exception to your own life plan.
However, if you continue working until age 65 without retiring, you may earn significantly more income than when using the special deduction. It is recommended to carefully consider and tailor this exception to your own life plan.
Japan Class Tax Corporation
Interview cooperation/Yoshitaka Nakagawa
Executive Tax Accountant at Nihon Class Tax Corporation
Tax consulting, support for final tax returns, organizational restructuring consulting, succession and business succession consulting, accounting outsourcing, early closing of companies listed on the Tokyo Stock Exchange, and a wide range of business experience. Our motto is to provide advice on “smooth business succession” and “non-debatable succession” tailored to each individual’s situation, earning high praise and trust from many clients.
Composition/Editing/Keiko Matsuda (Kyoto MediaLine)