Employed individuals are often concerned about how much pension they will receive in the future through their workplace’s welfare pension system. The welfare pension is generally received starting at age 65. Those who have worked for a long time may have the possibility of receiving their pension early upon retirement, with a special addition called the “44-year exception.” This exception allows individuals who have contributed to the pension system for 44 years or more to start receiving fixed pension amounts if they stop being insured before reaching the qualifying age. It is important to consider the conditions and implications of this exception.
Employees working for a company are often curious about how much pension they will receive in the future through their workplace’s welfare pension system. As a general rule, welfare pensions begin at the age of 65. If you have been working at a company for a long time, there is a possibility that you can receive your pension early upon retirement. In such cases, there is a provision called the “44-year special exception” that adds to the normal pension amount.
Therefore, this time, Kazutaka Nakagawa from Japan Clearas Tax Corporation would like to introduce you to the “44-year special exception” of the welfare pension, its overview, and points to note based on his knowledge and experience gained through years of tax return support.
What is the “44-year special exception” of the welfare pension?
What are the provisions and conditions of the “44-year special exception” of the welfare pension?
How much is the additional pension amount from the “44-year exception”?
What are the disadvantages and points to note of the “44-year special exception”?
Summary
What is the “44-year special exception” of the welfare pension?
If a person has been enrolled in the welfare pension insurance for 44 years or more and is receiving the special old-age pension (proportional reward part), they can start receiving the fixed part upon ceasing to be insured due to retirement or other reasons before reaching the age specified. The system that allows you to receive a certain amount in addition to the reward proportional part is collectively referred to as the “44-year special exception.”
In this case, you can start receiving the fixed amount from the month after you stop the insurance. In other words, due to the special exception of 1944, those who are enrolled in the welfare pension, receiving the proportional reward part of the special old-age pension, can retire before reaching the age of 65 when the National Pension is provided. This can be considered as an additional payment measure.
Additionally, if there are beneficiaries (children or spouses) eligible for the additional pension amount, you can submit the “Welfare Pension/Old-age Mutual Aid Pension Supplementary Grant Start Reason Notification” form. You can start receiving the additional pension amount from the next month after you have stopped being insured.
Special Allowance
From 2024, the starting age for the old-age basic pension (National Pension) and the welfare pension will be 65, and under certain conditions, it can be provided from ages 60 to 64. This is known as the special benefit.
By utilizing the special contribution system, you can start receiving the welfare pension from the age of 60 onwards. This helps reduce the economic impact.
This special payment includes a fixed amount part corresponding to the old-age basic pension and a proportional reward part corresponding to the old-age welfare pension. Normally, the fixed part is received first before the proportional part.
Additional Amount per Year
If your spouse has been enrolled in the welfare pension insurance for 20 years…
At the age of 65 (or when the part of the fixed amount payment starts), if the person continues to support their dependents such as a spouse or child…
If the period of fixed-term employment is reviewed, or the period of retirement is revisited (or after the age of 70), and you have a spouse or child being supported, you can receive an additional amount.
Also, the insured period of the welfare pension is 15 to 19 years from the age of 40 and beyond (35 years for women, miners, sailors) except for membership in mutual aid associations, etc.
The provisions and conditions of the “44-year special exception” of the welfare pension are as follows:
Conditions and Notification Required to Receive the 44-Year Special Deduction
Must be over 44 years of age.
During the insured period of the welfare pension, the insured person is considered to have been enrolled in the insured period of the welfare pension/employee mutual aid association managed by the Japan Pension Agency or have been enrolled in the insured period of the welfare pension. Private school mutual aid insurance, the insured period of those aged 44 and over is only one period (no aggregation of each period).
Conditions for receiving the payment
・Males born before April 1, 1963
・Females born before April 1, 1960
・Qualifying period for receiving the old-age basic pension (10 years)
・Must have been enrolled in the welfare pension insurance for at least 1 year.
・Must have reached the age of application based on your date of birth
Regarding the submission of the notification…
When the recipient retires, the employer submits a Notification of Loss of Insured Qualifications to the pension office, and the procedures regarding this exception are also completed. Therefore, the recipient does not need to send a notification to receive the fixed part.
How much is the additional pension amount from the “44-year special exception”?
The amount added due to the 44-year special exception consists of the total of the “fixed amount part” and the “proportional reward part” as follows:
Fixed Part: The fixed part is the part that serves as the calculation basis for the special payment of the old-age welfare pension, and it varies depending on the length of the welfare pension enrollment period. The calculation method is as follows:
[Calculation formula for the fixed part (from April 2020 onwards)]
・Born on April 2, 1955, or later
1,701 yen x Rate by date of birth x Number of months in the insurance period *
・For those born before April 1, 1955
1,696 yen x Rate by date of birth x Number of months in the insurance period *
* The maximum number of months in the insurance period varies according to the following dates of birth.
・For people born between April 2, 1930, and April 1, 1944, the maximum months are 444.
・For people born between April 2, 1945, and April 1, 1945, the months are 456.
・For people born between April 2, 1945, and April 1, 1945, the months are 468.
・For people born after April 2, 1945, the months are 480.
Proportional Reward Part:
The proportional reward part serves as the basis for calculating the pension amount of the old-age welfare pension, disability welfare pension, and survivor’s welfare pension, and is determined based on the pension enrollment period and past rewards.
The calculation method is as follows:
Reward Ratio = A + B
A: Participation period by March 2003
Average standard reward amount per month * 7.125/1,000 * Number of months in the enrollment period until March 2003
B: Participation period after April 2003
Average standard reward amount * 5.481/1,000 * Number of months in the enrollment period after April 2003
* Previous amount
If the amount calculated by the previous formula is less than the previous amount, the previous reward amount will be regarded as the reward amount of the proportional part (hereinafter referred to as the calculation formula).
(Average Standard Reward Amount per Month * 7.5/1000 * Number of Months in the Enrollment Period until March 2003 + Average Standard Reward Amount * 2 * 5.769/1000 * Number of Months in the Enrollment Period after April 2003) * 1,041
*1 For the enrollment period until March 2003, it is the total amount per month of the standard reward month basis for each month divided by the total months of the enrollment period until March 2003.
*2 For the enrollment period after April 2003, it is the total amount of the standard reward per month and the total amount of the standard bonus for each month divided by the total months of the enrollment period after April 2003.
What are the disadvantages and points to note of the “44-year special exception”?
The 44-year special exception cannot be used if you have a certain level of income. Specifically, if your monthly income is 88,000 yen, you cannot apply, and you will have to choose between retiring and using the 44-year special deduction or continuing to work. If your income is stable, it may be more beneficial to work until the age of 65 without using this exception, as you may receive a higher net income.
Summary
The 1944 special system aims to reduce the financial burden associated with the special payment of the welfare pension and raise the eligibility age to 65. By receiving the fixed special old-age pension that would not have been granted originally, there is a possibility of creating economic flexibility. However, if you continue to work until the age of 65 without retiring, you may earn much more income than if you use the special deduction. It is recommended to consider your life plan according to your own circumstances rather than availing of this option easily.
●Interview cooperation/Kiyotaka Nakagawa
Representative Director, Certified Public Accountant, Japan Clearas Tax Corporation
With wide-ranging experience in tax consulting, tax return support, organizational restructuring consulting, business succession consulting, accounting outsourcing, early settlement, etc., for companies listed on the Tokyo Stock Exchange Market First Section and small and medium-sized enterprises and individuals as well. The company strives to provide advice on “smooth business succession” and “inheritance without disputes” tailored to individual circumstances, earning high praise and trust from many clients.