Japan’s 2025 Defined Contribution Pension Plan Reform
Japan’s 2025 defined contribution pension plan reform is advancing major changes to the country’s defined contribution (DC) pension system as part of the government’s upcoming tax reform proposals. The primary focus is on increasing the monthly contribution limits for both employer-sponsored DC plans and individual DC (iDeCo) accounts, aiming to strengthen retirement security and adapt to demographic changes. If approved, these reforms are expected to take effect as early as 2026[1].
Key Changes to Contribution Limits
| Plan Type | Current Limit (per month) | Proposed Limit (per month) | Change |
| Employer-sponsored DC (no DB plan) | ¥55,000 | ¥62,000 | +¥7,000 |
| Employer-sponsored DC (with DB plan) | Formula-based | ¥62,000 minus DB equivalent | Formula-based |
| Self-employed (iDeCo) | ¥68,000 | ¥75,000 | +¥7,000 |
- Salaried workers: The total monthly limit for employer-sponsored DC plans will rise by ¥7,000, from ¥55,000 to ¥62,000.
- Self-employed (iDeCo): The monthly limit will increase from ¥68,000 to ¥75,000.
- Employees with both DC and DB plans: The new DC limit will be ¥62,000 minus the DB equivalent contribution, replacing the previous fixed sub-limit.
- The reforms will abolish the requirement that employee voluntary DC contributions cannot exceed employer contributions, simplifying plan administration[1].
Rationale for the Reforms
- Demographic Pressures: With nearly 30% of Japan’s population aged 65 or older, the government aims to enhance retirement security and address the impact of an aging society[2][3].
- Retirement Security: Higher contribution limits are intended to help workers—especially those without defined benefit (DB) plans—accumulate more substantial retirement assets[1].
- Equity and Flexibility: The reforms aim to provide more equitable access to retirement savings, regardless of employment type or company pension structure, and to simplify participation rules[1].
Employer Action Points
Monitor Legislative Progress – The reforms are still under consideration and may be implemented from 2026. Employers should stay updated on the legislative timeline and final details[1].
Review Plan Design – Assess whether your current DC plan design takes full advantage of the higher contribution limits. For companies with both DC and DB plans, note that the new DC limit will be calculated as ¥62,000 minus the DB equivalent contribution, requiring careful coordination between plan types[1].
Update Payroll and HR Systems – Prepare to adjust payroll systems to accommodate higher contribution ceilings and new administrative rules. Ensure systems can handle the abolition of the employer-employee matching requirement for voluntary contributions[1].
Communicate Changes to Employees – Clearly inform employees about the new contribution opportunities and any changes to plan participation or matching policies. Provide investment education, as required by Japanese DC plan regulations, to help employees make informed choices.
Consider Competitive Positioning – The higher limits allow employers to offer more competitive retirement benefits, which may help attract and retain talent in a tight labor market.
Compliance and Reporting – Ensure ongoing compliance with Japanese pension regulations, including timely remittance of contributions and accurate reporting. Monitor for any changes in tax treatment or reporting requirements stemming from the reforms[1].
Additional Context
- Expanded Eligibility: The reforms are part of a broader initiative to modernize Japan’s pension system, including expanding eligibility for part-time workers and addressing the “106-man yen wall” (income threshold for pension participation)[4][3].
- Employee Pension Insurance: The company size threshold for mandatory participation in Employee Pension Insurance will be lowered in phases, expanding the pool of eligible employees and increasing employer obligations[2][4].
- National Pension System: Broader pension reform discussions include proposals to extend the national pension premium payment period and to shore up benefit levels in the face of demographic and fiscal pressures[3].
New Monthly Contribution Limits
| Category | Old Limit (JPY) | New Limit (JPY) | Notes |
| Employer DC, no DB plan | 55,000 | 62,000 | For employees without DB plans |
| Employer DC, with DB plan | Formula-based | 62,000 – DB eq. | Based on DB equivalent contribution |
| Self-employed (iDeCo) | 68,000 | 75,000 | For self-employed, students |
Employers should begin preparing for these changes now by reviewing plan design, updating systems, and planning employee communications. Staying informed and proactive will ensure compliance and help maximize the benefits of these reforms for both employers and employees[1][2][3].