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How Pension Benefits Work

How benefits worked before the consolidation of employee pension systems

Pension benefits used to have two main branches: “salaried employees of private companies” were given Employees’ Pension and “private school personnel and government employees, etc.” were given Mutual Aid Pension, as additional benefits to the Basic Pension (refer to the illustration below).

  • “1st tier” was Old-age Basic Pension, which was calculated and given proportional to the length of the participation period in the National Pension for all residents in Japan. Old-age Basic Pension was administered by the Japan Pension Service.
  • “2nd tier” was a pension, which was calculated and given based on the length of the participation period in Employees’ Pension and/or Mutual Aid Pension respectively and the earnings of the participant (earning-related portion).
  • Furthermore, for private school personnel and government employees, “3rd tier” was calculated and given, as part of the Mutual Aid Pension given as a public pension, based on the participation period and earnings the same as in the “2nd tier” (occupation-related portion).
    For salaried employees of private companies, corporate pension such as defined-benefit corporate pension in which each company participates might be given as “3rd tier.” The part excluding this corporate pension would be public pensions. (refer to the illustration below)

How benefits worked after the consolidation of employee pension systems

As a result of the consolidation of employee pension systems, private school personnel and government employees are also considered insured persons of the Employees’ Pension Insurance. Therefore the pension benefits of the “2nd tier” for which the eligibility for receiving the benefits that comes into effect after October 2015 are given as Employees’ Pension. Furthermore, the pension for occupation-related portion in the Mutual Aid Pension system (previously 3rd tier pension) has been dismantled, and as a new pension, Retirement Pension Benefits (new 3rd tier pension) has been established. The premiums for Retirement Pension Benefits are required in addition to the premiums for Short Term Benefits (health insurance)and Employees’ Pension Insurance premiums (private schools version).

How Pension Benefits Work