What is 確定拠出年金?

[brian911]

Hi guys.

I quit my job at the last company and joined this new company.

I noticed that they have 確定拠出年金 as one of their welfare program.

A quick gg search told me that this is "defined contribution pension plan". My understand is each employee contribute a mount of their monthly salary to company then company's using those money to invest into whatever they want to make profit.
So when I retire, i will receive those money based on my company's business result.
Worst case is i can't receive anything if their invest suffer losses. Is that correct?

Also, someone can explain why some companies have it while other don't?

 

[TAG Manager]

Also, someone can explain why some companies have it while other don't?

It's fairly new in the grand scheme of things... It became available to my group in 2017 but I've not acted upon it.
I don't know the exact rule on each company's own participation in this particular nenkin scheme.

@Sudsy may have a better, well formed, educated answer.

Your overall understanding is basically correct but at least in our case, we use a 3rd party firm to make the investment. (This one shows up a lot on searches: https://www.aeonbank.co.jp/ideco/)

 

[Frenchy]

Hi guys.

I quit my job at the last company and joined this new company.

I noticed that they have 確定拠出年金 as one of their welfare program.

A quick gg search told me that this is "defined contribution pension plan". My understand is each employee contribute a mount of their monthly salary to company then company's using those money to invest into whatever they want to make profit.
So when I retire, i will receive those money based on my company's business result.
Worst case is i can't receive anything if their invest suffer losses. Is that correct?

Also, someone can explain why some companies have it while other don't?

I think you can cash it out if you leave the company before retirement, and if your new company doesn’t have a similar system. But not sure, you need to check directly with your HR department

 

[Sudsy]

Hi guys.

I quit my job at the last company and joined this new company.

I noticed that they have 確定拠出年金 as one of their welfare program.

A quick gg search told me that this is "defined contribution pension plan".

This is kind of like the Japanese version of an American 401K, and is rapidly taking the place of the old taishokukin system. Google IDeCo, there's a lot of info out there.

My understand is each employee contribute a mount of their monthly salary to company then company's using those money to invest into whatever they want to make profit.
So when I retire, i will receive those money based on my company's business result.
Worst case is i can't receive anything if their invest suffer losses. Is that correct?

That's not how it works. Your company isn't choosing the investments, you are.

Think of it like an investment account into which you are (or rather, your company on your behalf is) making a regular monthly contribution. You can choose from a few dozen mutual funds investing in various industries/commodities, with different risk profiles. You decide what percentage goes into each of the funds you choose.

Your company will contract with a bank who will run the program, and you choose the level of risk you're comfortable with from among the products they manage. You can change the allotments later, usually for a small fee.

Your employer will be depositing a monthly amount into the account, this amount will vary based on the company. My current employer puts in an amount equal to 5% of my salary each month. I have the option of matching that, matching it partially, or not at all.

Also, someone can explain why some companies have it while other don't?

It's not required for them to offer it. Some companies offer it as an incentive, others prefer to have higher base salaries, some stick with the old taishokukin system, and some just pay their employees like crap.

I think you can cash it out if you leave the company before retirement, and if your new company doesn’t have a similar system. But not sure, you need to check directly with your HR department

You can't cash it out until you reach retirement age, but you can transfer it to a new company if you change employers. If the new employer doesn't offer IDeCo, then it sits and matures until retirement or until you start somewhere else that has IDeCo.

 

[Frenchy]

This is kind of like the Japanese version of an American 401K, and is rapidly taking the place of the old taishokukin system. Google IDeCo, there's a lot of info out there.



That's not how it works. Your company isn't choosing the investments, you are.

Think of it like an investment account into which you are (or rather, your company on your behalf is) making a regular monthly contribution. You can choose from a few dozen mutual funds investing in various industries/commodities, with different risk profiles. You decide what percentage goes into each of the funds you choose.

Your company will contract with a bank who will run the program, and you choose the level of risk you're comfortable with from among the products they manage. You can change the allotments later, usually for a small fee.

Your employer will be depositing a monthly amount into the account, this amount will vary based on the company. My current employer puts in an amount equal to 5% of my salary each month. I have the option of matching that, matching it partially, or not at all.



It's not required for them to offer it. Some companies offer it as an incentive, others prefer to have higher base salaries, some stick with the old taishokukin system, and some just pay their employees like crap.



You can't cash it out until you reach retirement age, but you can transfer it to a new company if you change employers. If the new employer doesn't offer IDeCo, then it sits and matures until retirement or until you start somewhere else that has IDeCo.

Thanks Sudsy. Damn I hate those things when you leave cash here and there everytime you change employers...
by retirement age I will probably need to contact 3 or 4 institutions which I’m sure would have merged or disappeared in the meantime , or lost my file etc... National pension systems may be slow and bureaucratic but at least you face them from day one till the end.

 

[warubuta]

The amount you can contribute is limited to the poin where it isn’t worth the bother. Contribute the max and choose funds or whatever. The money you save in taxes might buy you a few blowjobs at Kanda Sexy Kat - if your lucky.