Overview
Kōsei Nenkin (厚生年金), or Employees’ Pension Insurance, is the earnings-related pension system for salaried workers in Japan. It is part of the national public pension scheme and works in tandem with the National Pension (Kokumin Nenkin) to provide retired employees with a stable income. All company employees who are enrolled in Shakai Hoken are automatically enrolled in Kōsei Nenkin – when a worker contributes to Kōsei Nenkin, they are also fulfilling their contribution to the basic National Pension . Established in its current form by the Welfare Pension Insurance Act of 1954, Kōsei Nenkin covers the majority of private sector employees as well as public servants and company officers in certain cases. The system is administered by the Japan Pension Service under the Ministry of Health, Labour and Welfare. Its primary purpose is to replace a portion of a worker’s income after retirement, thus preventing a sharp drop in living standards, and to offer protection in cases of disability or death. Kōsei Nenkin is a defined-benefit social insurance program: benefits are defined by law based on earnings and years of contribution, rather than individual account balances.
Contributions and Funding
Kōsei Nenkin is funded by mandatory contributions from both employers and employees. The contribution amount is calculated as a fixed percentage of the employee’s standard monthly salary and bonus. As of the mid-2020s, the contribution rate is approximately 18.3% of the employee’s earnings, which is split evenly between employer and employee (roughly 9.15% of salary paid by each side) . These contributions are typically deducted from the employee’s paycheck each month, with the employer remitting both halves to the Japan Pension Service. Contribution rates are uniform nationally and are periodically adjusted by the government to ensure the pension system’s financial health, especially in light of Japan’s aging population. Because employers pay half the premium, Kōsei Nenkin represents a significant benefit cost for companies, but it is mandated by law. The government also subsidizes a portion of the National Pension component of the system using general tax revenue.
An important aspect is that there is a minimum qualifying period to receive benefits. Under reforms that took effect in 2017, a person must have contributed (or have equivalent credited periods) for at least 10 years to be eligible for an old-age pension (this was reduced from a previous 25-year requirement). Contributions to Kōsei Nenkin also count toward this minimum. If a foreign employee works in Japan only a short time (less than 10 years) and then leaves, they may claim a Lump-Sum Withdrawal Payment (dattai ichijikin) for a portion of the pension contributions they paid, provided they meet the conditions (such as having at least 6 months of coverage and filing the claim within 2 years of leaving Japan) . Additionally, Japan has bilateral social security agreements with many countries to avoid double contributions and to totalize pension periods, so in many cases foreign workers can combine periods in Japan with those in their home country to qualify for benefits, rather than taking a lump-sum refund.
Benefits and Eligibility
Kōsei Nenkin provides several types of benefits:
• Old-Age Employees’ Pension (老齢厚生年金): This is the regular pension paid to an insured person after reaching pensionable age. The standard pensionable age for Kōsei Nenkin’s old-age benefit is gradually being raised to 65 (in line with the National Pension). The amount of the pension is calculated based on the individual’s average standard monthly earnings over their career and the length of participation. In simple terms, the more one earned and the longer one contributed, the higher the pension, up to certain caps. Upon reaching eligibility age, the individual will receive both the National Pension (a flat-rate amount) and the Kōsei Nenkin pension (an earnings-related amount). The two combined make up their total public pension. If a person starts the pension earlier (as early as 60) or later (as late as 70), adjustments (reductions or increases) are applied.
• Disability Employees’ Pension (障害厚生年金): If an insured worker becomes disabled due to illness or injury, they may receive a disability pension from Kōsei Nenkin, provided the disability is of a recognized severity and the person was current with contributions at the time of onset. This pension is paid in addition to any National Pension disability benefit and is calculated based on the severity of disability (classified in grades) and the individual’s earnings record. It ensures a replacement income for workers who can no longer earn as before because of a disability.
• Survivors’ Employees’ Pension (遺族厚生年金): If an insured person (or a pensioner) dies, their dependent family (typically surviving spouse and children) may receive a survivor’s pension. The Kōsei Nenkin survivor benefit is often payable to a widow with dependent children under a certain age, and is calculated based on the late worker’s earnings and pension rights . This provides financial support to families who lose their breadwinner.
The above benefits (old-age, disability, survivors) make Kōsei Nenkin a comprehensive social insurance. The old-age pension usually requires the individual to have paid at least 120 months (10 years) of contributions . Disability and survivor pensions require that the insured status was in good standing (i.e., not too many missed contributions) at the time of disability or death. The system is designed so that Kōsei Nenkin benefits, together with the basic pension, replace a portion of a worker’s pre-retirement income. Currently, a full-career average earner might expect the total public pension (basic + earnings-related) to replace roughly 50% of their pre-retirement income, though this percentage can vary.
Importance
Kōsei Nenkin is a vital part of Japan’s social security system, especially as the country faces demographic challenges. For employees, Kōsei Nenkin provides the promise of financial security after retirement, which is particularly important in a society with long life expectancy. It also offers peace of mind that in the event of unforeseen circumstances like severe disability or death, there is some safety net for them or their families. For employers, enrolling employees in Kōsei Nenkin (and paying the premiums) is not only a legal obligation but also part of the social contract of doing business in Japan – it demonstrates a commitment to employees’ long-term welfare. In terms of HR and payroll, Kōsei Nenkin contributions are a major consideration, and employers must accurately report salaries and remit contributions to avoid penalties.
From a broader perspective, Kōsei Nenkin, together with the National Pension, forms the backbone of retirement income for Japan’s elderly. As Japan’s population ages, the sustainability of Kōsei Nenkin is a subject of policy adjustments (such as gradual contribution increases and benefit formula changes). Nonetheless, for individuals working in Japan, paying into Kōsei Nenkin is generally very beneficial, as it can yield a lifelong annuity. Even foreign workers who leave Japan can benefit through pension agreements or partial refunds, meaning their contributions are not wasted. In sum, Kōsei Nenkin ensures that Japan’s employees are not left destitute in old age and that they have insurance against life’s uncertainties, funded through a fair sharing of costs between employer, employee, and government .
Sources: Japan Pension Service – Guide to Employees’ Pension Insurance ; MHLW – Pension Handbook; Welfare in Japan (Pensions) .
