[Essential Guide] What Is the Supplementary Pension? Explaining the “Ultimate Investment Strategy” That Increases Your Pension for Just 400 Yen a Month

“I’m worried that my future pension will be too small…”

“Is there an easy way for self-employed individuals to increase their pension benefits?”

For those with these concerns, we recommend the National Pension’s “Supplementary Pension” system.
This system boasts an extremely high return rate despite its low cost of just 400 yen per month.

In this article, we’ll explain everything from how the Supplementary Pension works to its pros and cons, as well as smart ways to use it.

1. What Is the Supplementary Pension? A Simple Explanation of How It Works

The Supplementary Pension is a system that allows Category 1 insured persons under the National Pension (such as self-employed individuals, freelancers, and students) to increase the amount of pension they will receive in the future by adding 400 yen to their monthly premium.

Formula for Calculating the Increased Pension Amount

The annual amount of the “Supplementary Pension” you will receive in the future is determined by the following formula:
200 yen × Number of months the supplementary premium was paid
For example, if you pay for 20 years (240 months), your future pension will increase by 48,000 yen annually for the rest of your life.

2. The Biggest Advantage of the Supplementary Pension: An Amazing “Return Rate”

The reason the supplementary pension is called the “best pension strategy” lies in its overwhelming value for money.

You’ll “break even” in just 2 years

The biggest feature of the supplementary pension is that “if you receive payments for 2 years, you’ll recoup the premiums you paid.”

• Amount paid: 400 yen × 12 months = 4,800 yen
• Amount received (annual): 200 yen × 12 months = 2,400 yen

In other words, you’ll recoup your initial investment within two years of starting to receive benefits, and from the third year onward, everything will be profit.

Other benefits

• This is a lifetime annuity.
  You will receive payments for the rest of your life, until you pass away. The longer you live, the more you benefit.
• Full tax deduction
  The additional premiums you pay qualify for the “social insurance premium deduction,” providing tax savings.

3. Important Points to Note and Drawbacks

While this is an excellent system, there are a few points to keep in mind.

• Not adjusted for inflation
  While the standard Basic Old-Age Pension amount fluctuates in line with inflation, the “200 yen” unit price for the Supplementary Pension is fixed.
• Cannot be combined with the National Pension Fund
  Individuals enrolled in the “National Pension Fund” are not eligible to enroll in the Supplementary Pension.
• Eligibility is limited
  Salaried employees enrolled in the Employees’ Pension Insurance (Category 2 insured persons) and their spouses who are dependents (Category 3 insured persons) are not eligible.

4. Which is a better deal: the Supplementary Pension or “iDeCo”?

To put it simply, the smartest choice is to use both.
The Supplementary Pension is included within the iDeCo contribution limit (68,000 yen per month).
Paying into the Supplementary Pension reduces the amount you can contribute to iDeCo by 400 yen, but the guaranteed return of the Supplementary Pension—which pays for itself in two years—is something no investment trust can match.

The standard approach is to prioritize the Supplementary Pension over iDeCo.

5. How to Enroll in or Withdraw from the Supplementary Pension

The process is very simple.

1. Where to go: Visit the pension counter at your local municipal office or a pension office.
2. What to bring: Your pension handbook (or Basic Pension Number Notification), and proof of identity.
3. Procedure: Simply submit the “Application for Payment of Additional Pension Premiums” (you can start paying that same month).

*Note: If you decide you want to stop, you can do so at any time simply by submitting a withdrawal notice.

Summary: If you’re a freelancer, you’d be crazy not to sign up!

The Supplementary Pension is an “excellent program” unique to the public pension system that allows you to significantly boost your financial security for the future for just 400 yen a month.

• An outstanding return on investment that pays for itself in just two years
• The peace of mind that comes with receiving payments for life
• Plus, you can enjoy tax savings

If you’re a sole proprietor or freelancer who hasn’t enrolled yet, why not stop by your local government office today?