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The story
It has come to light that the enrollment rate for the individual-type Defined Contribution Pension Plan (iDeCo) remains below 10%. Compared to NISA, iDeCo’s tax-advantage structure is harder to understand, and the fact that funds generally can’t be withdrawn until age 60 reportedly makes financial institutions reluctant to actively promote it. A system reform is also planned for December. On 5ch, while some pointed out that it’s “just a tax deferral scheme,” others argued that depending on how you take the payout it can end up tax-free, and that people should max out both NISA and iDeCo together — opinions were split on which to prioritize.
The individual-type Defined Contribution Pension Plan (iDeCo) hasn’t caught on nearly as much as the Nippon Individual Savings Account (NISA). Its tax-advantage structure is complicated, and many financial institutions are notably reluctant to court iDeCo customers. The enrollment rate is below 10%. Will December’s system reform be the spark that boosts its popularity?
A 25-year-old female office worker living in Tokyo started investing about five years ago. She considered iDeCo but chose NISA instead — the deciding factor was that NISA lets you withdraw your money anytime.
NISA, she says, is good for “a sudden illness or a move…”
Source: nikkei.com / Read the original article here
What people said
Lol, the secret's out — it's just a tax deferral scheme.
No, it goes to your surviving family as an inheritance.
You can pick S&P funds too — I chose the S&P back around 2008 and just left it alone, and it's grown a ton since then.
Yeah, it just widens the wealth gap.
That's exactly why they go around desperately trashing it — they want more poor, miserable company.
How exactly is it better? (´・ω・｀)
With iDeCo, the deduction you get at payout depends on how many years you've been enrolled, so it's worth starting early even at the minimum contribution.
Just max out both.
Securing the enrollment period really matters — you can't go back and make up for lost time.
If you're not getting a severance/retirement payout, then as long as you stay within that deduction limit, you won't be taxed.
For people who actually have their act together, they should honestly scrap the employee pension system. Let them invest that money in stocks themselves instead — having people think about asset management while they're still working would definitely turn out better.
If you did that, the portion companies have been paying in could just vanish. Companies only pay it because it's mandatory — under labor contracts, it's not treated as wages.
These days young people's dream is a comfortable, carefree retirement in a nursing home.
Oops, I messed that up, my bad.
That tax break only applies while you're earning your salary — when you withdraw it in old age, you'll get hit with income tax.
I think it's better to just leave it stacked in the pension fund.
Since it's counted as pension income, it gets combined with your other pensions and bumps up your taxable income, so you end up losing a big chunk to social insurance premiums.
At this rate, I think the pension fund is going to lose out to inflation.
iDeCo is a hassle since you have to push the paperwork through your company, and because of the company's own in-house savings plan, the contribution limit usually ends up being only around 12,000 yen — so a lot of people probably decide it's not worth the effort.
Then again, most people probably don't have enough spare salary left to even get that far, lol.
Since last December, company paperwork isn't required anymore.
I'm self-employed, so I do both NISA and iDeCo — NISA is just for growth stocks, and the installment investing goes through iDeCo.
Background and Key Points of This Discussion
iDeCo is a “deferral-type” system: contributions made while enrolled are fully deductible from taxable income, but withdrawals can still be taxed even after applying the retirement income deduction or pension deduction — which is why the thread saw comments like “isn’t this just a tax deferral?” Still, it isn’t simply deferred tax: on top of lowering income and resident tax while you’re working, the deduction available at payout tends to work in favor of people with little or no severance pay, a point that’s easy to overlook. Unlike NISA, the restriction that funds generally can’t be withdrawn until age 60 is considered the biggest reason people avoid enrolling, and that lines up with the thread’s comments about the simplified company paperwork introduced in the system reform at the end of 2024. That said, topics like the merits of the employee pension system or the widening wealth gap are really a separate issue from iDeCo’s low enrollment rate, and tend to drift from the article’s main theme — the system being hard to understand — which is worth keeping in mind.
※This article is compiled and summarized from the 5ch (News Speed+) thread “iDeCo Enrollment Rate Below 10% — Harder to Understand Than NISA, Shunned by Financial Institutions.”
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