A series of amendments to the rules on Defined Contribution Pensions have been announced. Following are key points relating to workers.
u Amendments scheduled for April 2022
Expansion of the period of starting benefit payments (Implemented on April 1, 2022)
With the period of starting benefit payments of public pensions to be extended from April 2022, the upper age limit to start receiving benefits of corporate DC and individual-type DC (iDeCo) will also be raised from 70 to 75.
With this change, participants will be able to choose when to start benefit payments in the period from age 60 (after losing eligibility for the scheme) until they reach the age of 75.
Please note:
For people born before April 1, 1952, the upper age limit remains 70, since they will have turned 70 before this amendment is enforced on April 1, 2022.
People born on April 2, 1952, or after, can continue managing their assets until they turn 75, since they will reach 70 after the age limit is raised to 75 on April 1, 2022, according to this amendment.
The Ministry of Health, Labour and Welfare website (Japanese only)
u Amendments scheduled for October 2022
In the past, there was a restriction on workers who could participate in both Corporate DC and iDeCo for the ease of management of contributions’ upper limits. Employees could participate in both Corporate DC and iDeCo, only if their companies had a rule allowing workers to participate in iDeCo, based on labor-management agreement, and had also lowered the upper limit to the employer’s monthly contribution from 55,000 yen to 35,000 yen (or from 27,500 yen to 15,500 yen if the Defined Benefit plan is adopted).
From October 2022, a new system will be introduced to comprehensively manage contributions under Corporate DC and iDeCo. With this system, Corporate DC participants will be allowed, in principle, to subscribe to iDeCo, without the company setting a rule or lowering employers’ contribution limit.
In such case, however, Corporate DC’s employer contributions and iDeCo contributions must not exceed the ceilings described in the below chart.
Please also note that employees cannot subscribe to iDeCo, if the company adopts the scheme to allow employees to pay additional contributions (“matching contribution”) or Corporate DC’s employer contribution and iDeCo contribution exceed the monthly contribution limits.
[Limits on Corporate DC employer contributions and iDeCo contributions]
iDeCo contributions must be kept within the limit of 20,000 yen per month (12,000 yen if the employee subscribes to DB or other schemes *) and the combined contributions by the employee and the employer must not exceed 55,000 yen per month (27,500 yen if the employee subscribes to other schemes.)
|
|
Subscribes to Corporate DC only |
Subscribes to both Corporate DC and iDeCo |
|
Limits to Corporate DC employer contributions |
55,000 yen per month |
27,500 yen per month |
|
Limits to iDeCo contributions |
[55,000 yen] – [employer’s Corporate DC contribution] (with the upper limit of 20,000 yen) per month |
[27,500 yen] – [employer’s Corporate DC contribution] (with the upper limit of 12,000 yen) per month |
“DB and other schemes” include the defined-benefit corporate pension programs, employee pension funds and private school personnel mutual aid programs.
[What is iDeCo?]
iDeCo is a type of private pension programs that allow members to receive benefits in addition to public pension benefits. Unlike public pension programs, participation is voluntary. Members have to apply for the registration, contribute money and manage contributions at their discretion. They can receive benefits, based on the amount equal to their contributions plus investment profits. The use of the scheme along with the National Pension Program or Employee Pension Program helps provide financial security in one’s retirement life.
References (Japanese only)
About iDeCo
About law amendments
