Japan’s government has announced its plan to implement various increases to contribution limits for both employer-sponsored defined contribution (DC) pension plans and individual defined contribution pension plans (iDeCo) for contributions made from January 2027. These changes aim to enhance retirement income security for participants and enable more individuals to contribute meaningfully to their pension savings.
Update: This article has been updated following the Ministry of Health, Labor and Welfare’s recent announcement on its website of a planned implementation schedule for major changes to the private pension system. The implementation schedule sets out two key dates: 1 April 2026 and January 2027.
Background
The Ministry of Finance had included the increases to DC pension plan contribution limits as part of its proposed tax reforms for 2025. The Ministry of Health, Labor and Welfare subsequently announced through the implementation schedule that the government plans to implement the increases in contribution limits for employer-sponsored DC plans and iDeCo plans for contributions made from January 2027 (a specific date has yet to be announced).
Other key changes referred to in the implementation schedule have been introduced under the Pension System Amendment Act, which was passed by the House of Councilors and enacted on 13 June 2025. These include the abolition of restriction on employee contributions to employer-sponsored DC plans, which will take effect from 1 April 2026, and an increase in age limit for joining iDeCo plans, which is expected to take effect from January 2027 (a specific date has yet to be announced).
Japan previously implemented reforms to DC plans on 1 December 2024 by relaxing iDeCo participation requirements so that employees cannot be restricted from participating in iDeCo plans and raising the employer-sponsored DC contribution sub-limits (see previous Lockton article here (opens a new window) for more details).
Key details
Increases in contribution limits for employer-sponsored DC plans
Employer-sponsored (i.e., corporate) DC plans are voluntary plans contracted by the employer through a vendor, with investments and contribution rates chosen by the employer and participation offered to the entire group of their employees.
The maximum contribution amounts for an employer-sponsored DC plan are expected to increase for contributions made from January 2027 as follows:
Employee not enrolled in an employer-sponsored defined benefit (DB) plan: JPY 62,000 per month (currently: JPY 55,000 per month)
Employee also enrolled in an employer-sponsored DB plan: JPY 62,000 per month (currently: JPY 55,000 per month) minus the equivalent contribution for each employer-sponsored DB plan. As DB contributions are not fixed, a hypothetical “equivalent” contribution must be calculated – see more information on the Ministry of Health, Labour and Welfare’s website
.
Increases in contribution limits for iDeCo plans
iDeCo plans are individual voluntary tax-advantaged private pension plans contracted by the employee with a pension institution. While only individuals make contributions and employers do not make contributions to iDeCo plans, the maximum amounts that an employee can contribute depend on whether the employee is enrolled in employer-sponsored pension plans.
The maximum contribution amounts for iDeCo plans are expected to increase for contributions made from January 2027 as follows:
Current iDeCo contribution limit (per month) | New iDeCo contribution limit (per month) | |
Self-employed individuals, students | JPY 68,000 | JPY 75,000 |
Employee not enrolled in an employer-sponsored plan | JPY 23,000 | JPY 62,000 |
Employee enrolled in employer-sponsored DC plan only | JPY 20,000 OR JPY 55,000 minus employer’s contribution to employer-sponsored DC plan, whichever is less | JPY 62,000 minus employer’s contribution to employer-sponsored DC plan |
Employee enrolled in both employer-sponsored DC plan and employer-sponsored DB plan | JPY 20,000 OR JPY 55,000 minus employer’s contribution to employer-sponsored DC plan and equivalent contribution to employer-sponsored DB plan, whichever is less | JPY 62,000 minus employer’s contribution to employer-sponsored DC plan and equivalent contribution to employer-sponsored DB plan |
Employee enrolled in employer-sponsored DB plan only | JPY 20,000 OR JPY 55,000 minus equivalent contribution to employer-sponsored DB plan, whichever is less | JPY 62,000 minus equivalent contribution to employer-sponsored DB plan |
The changes aim to equalize the iDeCo contribution limits for all employees, regardless of enrollment in employer-sponsored plans.
Abolition of restriction on employee contributions to employer-sponsored DC plans
Currently, if an employer-sponsored DC plan permits voluntary contributions by employees, any such voluntary contributions cannot exceed contributions made by the employer.
Under the Act, this rule will be abolished with effect from 1 April 2026, so that employees will no longer be subject to such restriction and can choose to contribute more than their employers. This would be particularly relevant where the amount contributed by the employer is low and the employee wishes to supplement that amount.
However, the total amount of employee and employer contributions will still be subject to the contribution limits for employer-sponsored DC plans (see above).
Revision of age for joining iDeCo plans
Currently, the maximum age for employees to join iDeCo plans (provided that the individual is not receiving a basic old-age pension or iDeCo old-age benefits) is under 65 years old. Under the Act, this will be increased to under 70 years old. This change is expected to take effect from January 2027.
Employer action: PREPARE TO ACT
While the changes are only expected to take effect from January 2027 (except for the abolition of restriction on employee contributions to employer-sponsored DC plans, which will be abolished from 1 April 2026), employers should start evaluating any potential impact on their occupational pension plans and prepare to amend employer-sponsored DC plan rules accordingly.
If the Japanese government announces any updates on the planned implementation dates, the Lockton Global People Solutions Compliance Practice will update this article accordingly.
Further Information
Reiwa 7 (2025) Tax Reforms Outline | Ministry of Finance (opens a new window)
Pension System Amendment Act Enacted | Ministry of Health, Labor and Welfare (opens a new window)
