What would happen if a foreign national resident neglect to pay pension contributions?

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If you are living in Japan as a mid-to-long term resident, you probably are a member of one of the public pension system of Japan. Pension system in Japan is quite complicated and often confuse foreign national residents. Some people are reluctant to enroll in Japanese pension system as they will be returning to their home country in the future. Whether or not they are willing to enroll in Japanese pension system, it is simply mandatory for all residents who reside in Japan. If you neglect to pay pension contributions, it will cause significant inconvenience in the future. So, what would happen exactly if you don’t pay pension contributions?

Enrollment in pension system is mandatory for all nationalities

Under Japanese law, all residents aged 20 to 59 years who have an address in Japan must be covered by one of Japanese pension systems. There are three types of pension system in Japan: Employee’s Pension Insurance System for employees of businesses, Mutual Aid Pension for public service workers, and National Pension System for the rest of residents. Foreign national residents are treated equally with Japanese citizens in terms of obligation to enroll in pension system. All registered residents must pay pension contributions regardless of their nationalities. Some might think it is waste of money to pay pension contributions as they are living in Japan only for a few years. But this is not something they can neglect just because they are reluctant.

No contributions, no benefits

Generally, Employee’s Pension Insurance and Mutual Aid Pension system have less volume of unpaid contributions as employers are required to enroll their employees in the system by the law. National Pension System, on the other hand, has more unpaid contribution cases as members need to enroll and make payment by themselves.
If you don’t enroll in pension system or neglect to pay pension contributions, you will not be entitled to receive Old-age Basic Pension when you reach the age of 65. Also, National Pension System works as disability insurance or life insurance. You can receive Disability Basic Pension if you have a certain level of disability due to injury or illness, or receive Survivors’ Basic Pension when the main income earner of your household deceased. By neglecting pension contribution payments, you may lose all these coverages while you are staying in Japan, as well as entitlement for Lump-sum Withdrawal Payments if you are a foreign national resident. If you are from one of the Social Security Agreement countries, it may affect your entitlement for pension benefits in your home country.

About qualifying period

To clearly how neglect of contribution payment affects your pension entitlement, it is important to learn about the qualifying period of National Pension System.

Old-age Basic Pension

Since 1st August 2017, qualifying period of Old-age Basic Pension has been shortened to 10 years. Qualifying period is defined as the total coverage period to be qualified to receive Old-age Basic Pension. To be precise:

Total sum of number of contribution-paid months and number of contribution-exempt months

While number of contribution-unpaid months are not included in a qualifying period, a period you were exempt from contribution payment is counted in a qualifying period (Though the amount of benefit you are entitled to receive will be reduced)

Disability Basic Pension

To be eligible for Disability Basic Pension, you must meet either of the following conditions.

There is no unpaid contribution for one year up to two months prior to your first medical examination date.
Your contribution-paid periods and contribution-exempted periods are to be more than two thirds of your total coverage periods up to two months prior to your first medical examination month.

Survivors’ Basic Pension

To be eligible for Survivors’ Basic Pension, an insured pension must have met either of the following conditions.

There is no unpaid contribution for one year up to two months prior to the date of death.
Contribution-paid periods and contribution-exempted periods of an insured person are to be more than two thirds of your total coverage periods up to two months prior to the date of death.

Breach of pension contribution obligation may result in seizure of your asset

Other than that you will not be entitled for pension benefits, neglect of pension contribution may cause more serious issues. In fact, regulations for those who neglect to pay pension contributions are becoming stricter in recent years. If you keep neglecting contribution payment for a certain length of period, reminders from Pension Office (Japan Pension Service) start arriving. If you keep neglecting these reminders, you will receive a special demand letter, then a final demand letter. If you take no action at this time, seizure of your asset will be exercised to compensate the unpaid contribution amount.
As of now, people who has annual income of 3million yen or more and has not paid pension contribution for 13months or longer are subject to seizure of asset. Note that “annual income” here is defined as “annual household income”. For example, if you live with your family and total annual household income exceeds 3million yen, your families’ asset may be seized by the authority even though you earn only 1million yen annually. This rule applies equally to foreign national residents, therefore neglecting reminder from Pension Office is an unwise decision. If you have difficulties to pay pension contribution for any reason, make sure to consult at your municipal office.

Before call it an end

Whether you like it or not, you must enroll in the pension system as long as you live in Japan. If you neglect to pay pension contributions despite your adequate income, your asset may be subject to forcible collection. One thing quite obvious is that leaving it unsolved is never be a wise decision. If you have any difficulty to pay contributions, simply apply for appropriate exemption or postponement of contribution. If you have already received a reminder letter, consult at your municipal office as soon as possible.