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iDeCo features

An additional pension you can join and choose yourself: iDeCo

The individual-type defined contribution pension plan (iDeCo) is a private-pension plan governed by the Defined Contribution Pension Act. Joining the plan is optional. These plans let you apply, make contributions, and select the investment approach yourself and receive benefits based on the total of your contributions and investment returns. Special tax breaks also apply to contributions, investment returns, and when receiving benefits. Combining this plan with your National Pension or employee pension will help you accumulate the assets you need to enjoy a more comfortable, worry-free retirement.

With individuals living longer than ever before, an iDeCo additional pension offers the security you need for a more comfortable old age.

Japan has one of the world’s longest average life expectancies. Based on 2015 data from the Ministry of Health, Labour and Welfare, individuals who are currently 65 years old have an average remaining life expectancy of 19.46 years for men and 24.31 years for women (2015 Abridged Life Table [Men/Women]). That means many individuals have more than two decades of life to look forward to after turning 65

65歳時の平均余命

Postretirement lifestyles differ from person to person. According to preliminary figures from the 2016 Family Income and Expenditure Survey (Statistics Bureau, Ministry of Internal Affairs and Communications), average living expenses for a nonworking elderly couple household (nonworking household composed only of a husband 65 years or older and a wife 60 years or older) amount to 267,546 yen per month. Living expenses for a nonworking elderly single-person household (nonworking household composed of a single person 60 years or older) are 156,404 yen.

The incomes of elderly households also vary depending on work histories and pension plan statuses of the individuals concerned. Preliminary figures from the 2016 Family Income and Expenditure Survey (Statistics Bureau, Ministry of Internal Affairs and Communications) put average monthly actual income at 212,835 yen for nonworking elderly couple households and 120,093 yen for nonworking elderly single-person household.

To ensure a more comfortable old age, it’s a good idea to start by checking your public pension status and considering how much money you’ll have. You’ll need to take into account things like lump-sum retirement bonuses and corporate pensions. After doing that, you might want to consider joining the iDeCo plan as a way to gather the assets you’ll need to enjoy a more comfortable, worry-free retirement while getting tax breaks.

Overview of the plan

iDeCo is a private-pension plan governed by the Defined Contribution Pension Act, which went into effect in 2001. Since January 2017, the plan has been available to virtually any individual between the ages of 20 and 59.* The plan is designed to offer many individuals a way to gather the assets needed to make old age more comfortable.

  • * Those already enrolled in a corporate-type defined contribution pension plan can join iDeCo only if the rules of the corporate-type plan allow simultaneous enrollment in an individual-type defined contribution pension plan (i.e., iDeCo).

Advantages of iDeCo

Three tax breaks

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①All contributions are income tax deductible!

If you pay 10,000 yen per month, the full amount is eligible for tax reductions. If you pay 10% income tax and 10% resident tax, that reduces your tax bill by 24,000 yen per year.

Procedures for calculating your income tax deduction differ depending on how you pay your contributions and your participant category. Be sure to learn as much as you can about your situation.

②Investment returns are reinvested tax-free!

Normally, when you invest in financial products, the returns on your investments are taxed (withholding tax rate: 20.315%). With iDeCo, they’re reinvested tax-free
mplementation of the special corporation tax (1.173% per year on cumulative contributions) has been suspended until March 31, 2020.

③Big tax deductions also apply when receiving benefits!

With iDeCo, you can choose to receive either a lump sum or an annuity. (At certain financial institutions, you can also choose to receive the combination of a lump sum and an annuity.)

If you take your benefits in the form of an annuity, you are eligible for a “public-pension deduction”; if you opt for a lump sum, you can take advantage of a “retirement income deduction.”

How iDeCo works

iDeCo is a pension plan that lets you choose how to invest the contributions you pay in for the purpose of asset formation. You pay contributions until you turn 60, after which you can receive old-age benefits.

  • * Although investment vehicles that guarantee principal are available, if you choose to invest in vehicles such as investment trusts, the value of your plan may dip below principal.
  • * The age at which you start receiving benefits is determined based on factors such as total enrollment period.

Eligibility and contributions

Eligibility

Individuals wishing to join iDeCo must meet the following criteria:

Enrollment category Those eligible to join Those not eligible to join
National Pension category 1 insured persons Self-employed individuals, freelance workers, students, etc., who are residents of Japan and between 20 and 59 years of age Farmers Pension insured persons
Individuals subject to waiver (including partial waiver) of National Pension insurance premiums (Such individuals may join if they are recipients of the disability basic pension.)
National Pension category 2 insured persons Insured persons under 60 years of age under employee pension plans (company employees, public servants, etc.) Participants in corporate-type defined contribution pension plans at the company where they currently work (Such individuals may join if the rules of the corporate-type defined contribution pension plan permit simultaneous enrollment in an individual-type defined contribution pension plan.)
National Pension category 3 insured persons Dependent spouses between 20 and 59 years of age of employee pension plan participants -

Maximum contributions

The maximum monthly contribution depends on the enrollment category. Confirm to which enrollment category you belong.

You decide how much to pay in each month. You can start with even a small amount!

You can get started with iDeCo from as little as 5,000 yen per month. Set the monthly contribution you’re comfortable with in increments of 1,000 yen. So even if you don’t have a lot of money to spare, you can prepare for old age in an affordable way that suits your lifestyle.

Note: You are permitted to change your monthly contribution once per year.

Investment policy

Choose a combination of the investment products offered by your asset administrator to invest in. Select the investment products after determining your investment policy (after considering tolerable risk, desired rate of return, etc.). Then periodically check to see how your investments are doing and make any changes in the investment products you see fit.

You select the investment products yourself!

Your asset administrator will provide an explanation of the investment products it offers but will not recommend a specific product or products. That means you need to choose products that match your investment policy and decide the allocation to each product (i.e., what percentage of your monthly contributions goes to which product). Investment products will be purchased every month based on the allocation weights you determine.

  • * Does not take fees into account.

Choosing how you receive benefits

You can generally receive iDeCo pension assets in the form of old-age benefits from the age of 60.

You can choose how you receive your benefits!

①All at once in a lump sum
When you reach the age at which you are eligible to receive benefits (typically 60 years old), you can choose to receive all your benefits in a single lump sum at any point until you turn 70.
②Receive as an annuity
Right to benefits: If you choose to receive iDeCo benefits as an annuity, the benefits will be treated as a fixed-term annuity (of between 5 years and 20 years). When you reach the age at which you are eligible to receive benefits (typically 60).
③Combination of lump-sum and annuity
At some asset administrators, when you reach the age at which you’re eligible to receive benefits (typically 60 years old), you can opt to receive some of your pension assets immediately as a lump sum and the remainder in the form of an annuity.

Age of eligibility to receive benefits

To receive pension assets from the age of 60, you must have been enrolled in iDeCo for at least 10 years (this is referred to as the total enrollment period). If your total enrollment period is less than 10 years, the age at which you are eligible to receive benefits will be moved back accordingly.

Age of eligibility for receiving benefits depending on enrollment period
10 years or more→60 years old, 8 years or more but less than 10 years→61 years old, 6 years or more but less than 8 years→62 years old, 4 years or more but less than 6 years→63 years old, 2 years or more but less than 4 years→64 years old, 1 years or more but less than 2 years→65 years old

  • * Participants who suffer disabilities due to an injury or disease occurring or emerging before reaching the age of 70 are eligible for disability benefits after one year and six months with the disability.
  • * If a participant dies, a lump-sum payment for death will be provided to his or her surviving family.

Portability between pension systems

Keep what you signed up for even if you change jobs!

iDeCo pension assets are portable. By completing the specified transfer procedures, you can take your pension assets with you when you change jobs or leave a job. Additionally, as long as certain criteria are met, you can withdraw assets from other pension systems (employee pension funds, defined benefits corporate pension funds, etc.). For more information on transfers, consult your asset administrator.

Important points

  • Participants are personally responsible for the investment of their assets. The benefits they receive will vary, depending on the performance of their investments.
  • Investment products include products that do not have guaranteed principals. Select products based on a solid understanding of potential risks and benefits.
  • Since iDeCo is a pension plan designed to accumulate assets for old age, it is subject to tax breaks. This means that you will generally not be permitted to withdraw assets from the pension until you turn 60. Additionally, note that how long you’ve been enrolled in the pension plan will affect when you can receive your benefits.
  • Fees apply. (The amount of these fees will depend on the financial institution.)
  • Individuals with no taxable income will not benefit from income tax deductions for contributions.
  • The income tax deduction only applies to the participant’s income.
  • Spouses are not eligible to receive income tax deductions.
  • Investment assets are also subject to the separate special corporation tax; however, this tax has been suspended until March 31, 2020.

Important Procedures When Becoming an Overseas Resident

①Procedures for individual-type defined contribution pension plan (iDeCo) participants and investment instructors who are going to become overseas residents

iDeCo participants and investment instructors who are going to become overseas residents will need to conduct the necessary procedures after checking their own National Pension category.

National Pension category 1 insured persons

(Participants)
  • Contact your chosen asset administrator to obtain Notification of Loss of Participant Eligibility. Under “Reason for Loss of Eligibility” enter “01: No longer maintaining an address in Japan,” and then conduct the loss-of-eligibility procedures.
  • If the “Reason for Loss of Eligibility” on the Notification of Loss of Eligibility is “01: No longer maintaining an address in Japan,” enter your contact address (“Domestic Contact Address” if you can be contacted at an address in Japan or “Overseas Residence Address” if not) under “Overseas Resident Information.”
  • After loss of eligibility, you will become an investment instructor unable to make new contributions, and your existing accumulated pension assets will be managed for you until you are able to receive a pension beginning at age 60.
(Investment instructors)
  • Contact your chosen asset administrator to obtain a Change of Name/Address Notice for Participant, etc., and then conduct the change-of-address procedures.
  • Enter your contact address (“Domestic Contact Address” if you can be contacted at an address in Japan or “Overseas Residence Address” under “Overseas Resident Information” if not) under “New Address” on the Change of Name/Address Notice for Participant, etc.

Insured persons under employee pension plans and National Pension category 3 insured persons>

(Participants)
  • You may continue to participate in iDeCo even while residing overseas as long as you do not lose eligibility as an insured person under your employee pension plan (National Pension category 2 insured person) or as a National Pension category 3 insured person (a dependent spouse aged 20 to 59 of a category 2 insured person). However, since you will need to conduct the change-of-address procedures, contact your chosen asset administrator and submit a Change of Name/Address Notice for Participant, etc.
  • If you lose eligibility under your employee pension plan or as a National Pension category 3 insured person due to overseas residency, contact your chosen asset administrator and submit Notification of Loss of Participant Eligibility. (Also check with your asset administrator to see whether you need to submit any other documents.) When filling out the Notification of Loss of Participant Eligibility, choose “01: No longer maintaining an address in Japan,” under “Reason for Loss of Eligibility,” enter your contact address (“Domestic Contact Address” if you can be contacted at an address in Japan or “Overseas Residence Address” if not) under “Overseas Resident Information,” and then submit the notification to your chosen asset administrator. After loss of eligibility, you will become an investment instructor unable to make new contributions, and your existing accumulated pension assets will be managed for you until you are able to receive a pension beginning at age 60.
(Investment instructors)
  • Contact your chosen asset administrator to obtain a Change of Name/Address Notice for Participant, etc., and then conduct the change-of-address procedures.
  • Enter your contact address (“Domestic Contact Address” if you can be contacted at an address in Japan or “Overseas Residence Address” under “Overseas Resident Information” if not) under “New Address” on the Change of Name/Address Notice for Participant, etc.

②Procedures for participants in corporate-type defined contribution pension plans who are going to lose eligibility and become overseas residents

Basically, defined contribution pension assets may be received as old-age benefits starting at age 60. To start receiving old-age benefits at age 60 or older, you will need to transfer the pension assets accumulated under the corporate-type defined contribution pension plan to iDeCo and continue their asset management. Complete the procedures below.

If you satisfy the conditions for lump-sum payment of corporate-type defined contribution pension assets on withdrawal*, you may receive a lump-sum payment on withdrawal. For details, check with the asset administrator of your former employer’s corporate-type defined contribution pension plan.

(Note) Conditions for lump-sum payment of corporate-type defined contribution pension assets on withdrawal:

  1. You must be neither a corporate-type defined contribution pension plan participant or investment instructor nor an individual-type defined contribution pension plan participant or investment instructor.
  2. The amount of your personal managed assets as of the date of the request must not exceed 15,000 yen.
  3. No more than six months may have passed since the month after the month that includes the date you lost eligibility as a participant under the corporate-type defined contribution pension plan.

(Transfer procedures and registration of your overseas address)

  • If you will reside overseas after retiring from your employer, you must transfer your pension assets under the corporate-type defined contribution pension plan (i.e., your employer’s defined contribution pension plan) to iDeCo.
  • To complete transfer procedures, choose one asset administrator to handle your iDeCo, obtain from that asset administrator an Individual Managed Assets Transfer Request Form, fill in the necessary information, and return it.
  • On the Individual Managed Assets Transfer Request Form, enter your contact address (“Domestic Contact Address” if you can be contacted at an address in Japan or “Overseas Residence Address” if not) under “Address.”
  • The asset administrator will send the Notice of Opening iDeCo Account and the Notice of Pension Asset Balance to the address you registered. These notices also will show contact information for the investing-oversight asset administrator and the recordkeeping asset administrator. Keep the notices in a safe place, since you will need to contact these parties with any inquiries concerning asset management and to receive pension assets.

Procedures for Receipt of Benefits by an Overseas Resident

①Procedures for receipt of old-age benefits by an overseas resident who is an iDeCo participant or investment instructor

An iDeCo participant or investment instructor may receive accumulated pension assets as old-age benefits starting at age 60.

(Where to conduct procedures)

  • Even if you are an overseas resident, you may receive pension assets in a lump-sum or an annuity (installment) form once you have reached age 60, at which you have the right to receive benefits. Complete procedures to claim old-age benefits with the recordkeeping asset administrator managing your pension assets. Check with the recordkeeping asset administrator for details.

(Notes)

  • When you reach the age at which you have the right to receive benefits, the recordkeeping asset administrator will send you a notice of the old-age-benefit decision procedures. Since this notice will be sent to your registered address, when you become an overseas resident, complete the procedures that apply to your case from those described under parts ① to ③ of “Important Procedures When Becoming an Overseas Resident” to register your overseas residence address or domestic contact address.
  • To receive iDeCo pension assets, prepare an old-age-benefit decision request as described in the notice from the recordkeeping asset administrator and submit it to the recordkeeping asset administrator. Check documents, such as the Notice of Pension Asset Balance, sent to you periodically for contact information for the recordkeeping asset administrator.

②Procedures for requesting lump-sum death benefits

When an iDeCo participant or investment instructor or a person subject to automatic transfer (i.e., a person whose pension assets were transferred to a specified asset administrator due to failure to conduct the relevant procedures within six months after loss of eligibility under a corporate-type defined contribution pension plan) has passed away, his or her surviving family can receive lump-sum death benefits.

Where to request benefits

Where to request lump-sum death benefits varies depending on the circumstances of the deceased.

(If the deceased was an iDeCo participant or investment instructor)
  • A surviving family member should submit a Notice of Death of Participant, etc., to the asset administrator chosen by the deceased. Check with the asset administrator concerning how to obtain the Notice of Death of Participant, etc., and related procedures.
  • Attach a death certificate or other documentation regarding the death to the Notice of Death of Participant, etc. (you may attach a photocopy).
  • In addition to submitting the Notice of Death of Participant, etc., to the above asset administrator, the Lump-sum Death Benefits Decision Request must be submitted to the recordkeeping asset administrator managing the deceased’s pension assets. The recordkeeping asset administrator will handle payment procedures for the lump-sum death benefits.
  • Check with the recordkeeping asset administrator for procedural methods, since each recordkeeping asset administrator determines matters such as the format of the Lump-sum Death Benefits Decision Request and documents that must be attached to it.
(If the deceased was a person subject to automatic transfer)
  • A surviving family member must submit the Lump-sum Death Benefits Decision Request (for PFA use) to his or her chosen asset administrator. That asset administrator will handle payment procedures for the lump-sum death benefits.
  • Check with each asset administrator concerning how to obtain the Lump-sum Death Benefits Decision Request (for PFA use), documents that must be attached, and related matters.
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