So you lost your job, apply for special exemption of NPS

While you steadily work for a company, you wouldn’t pay much attention to contribution payments for the employees’ pension as normally these are automatically deducted from your monthly wage. Once you lose your job for some reason, however, you will have to switch your pension system to the National Pension System and make monthly contribution payments by yourself. With no plan for a next job and little money left, you may want to apply for exemption of contributions. But unfortunately, you may be disqualified from exemption of the contributions as it is calculated based on your income in previous financial year, and you must be working and earning sufficient income in previous financial year. If you are in such a difficult situation, the special exemption system will be a life saver for you.

Why use special exemption for unemployment?

Foreign residents working for Japanese enterprises must enroll in the Employee’s Pension Insurance System. Your contributions of EPIC are deducted from your monthly wages. In addition, the half of your contributions for EPIC are covered by the employer. However, once you leave your job for any reason, you will lose the membership in EPIC and have to enroll the National Pension System, then make monthly contribution payments by yourself. You may be qualified to be exempt from contribution payments by applying for exemption arrangement if you have financial difficulty to pay contributions. Your/your spouse’s income in previous financial year must be lower than a certain level to be qualified for exemption. But in reality, the income test based on previous financial year’s income often troubles applicants as they are struggling financially “right now”, no matter what income they earned in the previous year. In such cases, the special exemption for unemployment excludes your previous financial year’s income from an assessment if proofs in writing of your financial difficulty for unemployment are submitted. If you have family members living with you, entire family income will be assessed. If you are single or your spouse is a low income earner, you will have better chance to be qualified for the special exemption for unemployment and can continue to be eligible for the Disability Basic Pension and the Survivors’ Basic Pension in case of unexpected accidents.

Who can apply?

As mentioned earlier, this special exemption for unemployment is open to unemployed people who had been employed and enrolled in the employment insurance scheme, and lost their job for any reason including their own reasons. Other than former employees who lost their job, sole proprietors, who have been members of the National Pension System instead of the Employee’s Pension Insurance System, may also have difficulty to pay contributions when their business are forced to temporary or permanently close due to financial troubles. These people are also eligible to apply for the special exemption for unemployment by submitting the application form and written proofs of their situation. Applications can be made by unemployed who lost their job in the same financial year or in the previous financial year. The special exemption for unemployment covers the period from July to June next year. Applications can be made for the period starting the previous month the applicants lost their job.

How to apply

Applications of exemption or extension can be made at the pension counter in a municipal office. Obtain the application form at the counter or online, fill the form and submit it with your pension book or the pension number notification letter at the pension counter. The application can be sent by post as well. Bring your inkan just in case. Also, you are required to present an official proof of unemployment such as a separation notice and a certificate of the insured of employment insurance. If you are a sole proprietor and have officially noticed a temporary or permanent closure of the business, any of the following documents may be required to be submitted.

Copy of the approval letter from the ministry of health, labor and welfare regarding the comprehensive support loans and any other attachments
The certificate of full registry records or the certificate of all removed matters
Copy of the notice of change of tax payment place or the notice of discontinuation of business (with the official seal of a public institution such as tax office)
Copy of the notice of discontinuation of business to the public health department (with official seal of the public health department)
Other documents proving the loss of a job sent to you by public institutions

Recovery of the Past Exempted-Contribution

After your application for the special exemption for unemployment is approved and you become exempt from contribution payments, the period you are exempt will be included in the 25years coverage period for the Old-age Basic Pension, and the government will pay half of your contributions. It is recommended to recover the exempted contributions once your financial situation gets better, if you are going to live in Japan after you retire and wish to increase the amount of your future pension payments. You may retroactively make payments for past contribution-exempted periods for up to the past 10 years. Comparing to unpaid contributions which can be recovered date back to maximum 2 years, this is a great advantage of exemption arrangements. However, if you wish to recover the contribution three or more financial years later, a specific index will be imposed on your past contribution amount when you recover the payments. Therefore, recovery of past-exempted contributions should be done as soon as possible.

Summary

Squeezing out contributions of the National Pension from the tight budget is tough task for most of people, especially while they are mentally and financially damaged by losing a job. Once you are approved for the special exemption for unemployment, no need to be bothered with regular contribution payments, but you still can keep the same entitlement for emergency protections. You are very likely to be approved for this exemption arrangement if you are single. If you are unfortunately in such a difficult situation, think about applying for the special exemption for unemployment of the National Pension System.