When You Employ Someone Who Is Already Drawing a Pension

The old-age employees' pension is partly suspended once it and pay together exceed a set amount. The suspension adjustment amount from April 2026 is 650,000 yen, and up to 650,000 yen no level of pay reduces the pension. This article also sets out why an amount suspended during a deferral waiting period never comes back as an increase.

In short: the old-age employees' pension is partly suspended once it and pay together exceed a set amount. From April 2026 (令和8年4月) the threshold is 650,000 yen. Half of the excess is suspended, so up to 650,000 yen you can pay whatever you like and the pension is not reduced.

When you take on someone in their 60s or 70s, they will sometimes ask you to hold their pay down "because my pension will stop." That used to be sound. But the threshold rose sharply in April 2026, and at the pay levels of a small or medium-sized company the pension now rarely stops at all. If you set wages on the old assumption, you end up not paying wages you could have paid.

How much of the pension stops when the person works?

The Employees' Pension Insurance Act (厚生年金保険法, Act No. 115 of 1954), Article 46, paragraph 1, provides as follows. Where the basic monthly amount (the old-age employees' pension divided by 12) and the monthly remuneration equivalent (the standard monthly remuneration plus one-twelfth of the bonuses paid in the preceding 12 months) together exceed the suspension adjustment amount, half of the excess is suspended.

As a formula:

Suspended amount (per month) = (basic monthly amount + monthly remuneration equivalent − 650,000 yen) ÷ 2

The suspension adjustment amount is revised each fiscal year.

Fiscal year	Suspension adjustment amount
FY2024 (令和6年度)	500,000 yen
FY2025 (令和7年度)	510,000 yen
FY2026 (令和8年度, from April 2026)	650,000 yen

(Ministry of Health, Labour and Welfare, "令和8年度の年金額改定についてお知らせします", 23 January 2026 (令和8年1月23日))

That is a jump of 140,000 yen at once, from 510,000 yen to 650,000 yen. It is the increase made by Act No. 74 of 2025 (令和7年法律第74号), which took effect in April 2026.

Note that the Ministry's explanatory material for the bill states "500,000 yen → 620,000 yen". That is the statutory amount at FY2024 (令和6年度) prices, the figure written into the Act itself (Employees' Pension Insurance Act, Article 46, paragraph 3). Because the proviso to that paragraph revises the amount every fiscal year, the actual amount for FY2026 comes out at 650,000 yen. 620,000 yen and 650,000 yen are not in conflict.

What is suspended is only the earnings-related portion of the old-age employees' pension. The old-age basic pension (老齢基礎年金) is not subject to suspension under the in-work old-age pension rules.

Up to what age does each insurance scheme apply?

The upper limits differ from scheme to scheme. This is best held as a table.

Scheme	Upper limit on coverage	Basis
Workers' accident compensation insurance (労災保険)	No upper limit	Age is irrelevant so long as the person is a worker
Employment insurance (雇用保険)	No upper limit. From age 65, an older-worker insured person (高年齢被保険者)	Employment Insurance Act (雇用保険法, Act No. 116 of 1974), Article 37-2, paragraph 1
Employees' Pension Insurance (厚生年金保険)	Under 70	Employees' Pension Insurance Act, Article 9 and Article 14, item 5
Health insurance (健康保険)	75 (transfers to medical care for the late-stage elderly)	Health Insurance Act (健康保険法, Act No. 70 of 1922), Article 3, paragraph 1, item 7; Act on Assurance of Medical Care for Elderly People (高齢者の医療の確保に関する法律, Act No. 80 of 1982), Article 50, item 1
Long-term care insurance (介護保険), Category 2 insured person	Becomes a Category 1 insured person at 65	—

There is no age-70 upper limit in health insurance. What ends at 70 is Employees' Pension Insurance only; health insurance continues until 75. This is where the two are most often confused.

The dates on which coverage is lost also have a quirk. Under Employees' Pension Insurance, coverage is lost on the day the person "reaches the age of 70" (Employees' Pension Insurance Act, Article 14, item 5). "Reaching the age of 70" means the day before the birthday, so the date of loss is the day before the birthday as well. Loss of health insurance on reaching 75 falls on the birthday itself. The two are one day apart.

Notification for an employee aged 70 or over (70歳以上被用者該当届)

For someone who keeps working past 70, a notification for an employee aged 70 or over (70歳以上被用者該当届) may be required. Even though the person is no longer an insured person under Employees' Pension Insurance, the notification allows the pay to be reflected in the in-work old-age pension calculation (Employees' Pension Insurance Act, Article 27).

Situation	Notification
The amount equivalent to the standard monthly remuneration on the day of reaching 70 differs from the standard monthly remuneration on the previous day	Required (within 5 days of the day of reaching 70)
The amounts are the same	Not required (handled on the Japan Pension Service side; the treatment applied since April 2019 (平成31年4月))
The person is newly hired at 70 or over	Required

(Ordinance for Enforcement of the Employees' Pension Insurance Act (厚生年金保険法施行規則, Ordinance of the Ministry of Health and Welfare No. 37 of 1954), Article 10-4 and Article 15-2)

This applies to people who have a past period of coverage under Employees' Pension Insurance. Someone who has never been covered is outside the scope.

What should you watch when you employ someone who is thinking about deferral?

This is where the misunderstandings are most common.

Deferred receipt is the arrangement under which you put off the start of your pension in exchange for an increase. However, an amount suspended by the in-work old-age pension rules during the deferral waiting period is not subject to that increase.

The Japan Pension Service (日本年金機構) explains it this way. When the deferral supplement is calculated, the portion corresponding to the amount suspended under the in-work old-age pension rules is excluded and the average payment rate is applied.

Average payment rate = the sum of the monthly payment rates ÷ the deferral waiting period
Monthly payment rate = 1 − (the in-work suspended amount ÷ the old-age employees' pension amount at age 65)

In law, the basis is the Employees' Pension Insurance Act, Article 44-3, paragraph 4, which defines the deferral supplement as "an amount specified by Cabinet Order taking into account the amount that was to be suspended, calculated in accordance with the provisions of Article 46, paragraph 1."

So the amount that stopped does not come back later as an increase. What stopped simply stays unreceived.

That said, because the threshold rose to 650,000 yen in April 2026, far fewer people are affected at all. For someone with a basic monthly amount of 100,000 yen, nothing is suspended until the monthly remuneration equivalent reaches 550,000 yen. If you are asked to hold pay down "because I am deferring," work out first whether anything would actually stop. In most cases there will be no need to hold anything down.

Note also that deferral of the old-age basic pension is unaffected by the in-work old-age pension rules. Because the employees' pension and the basic pension can be deferred separately, the surest route for advice on which to choose is for the person to go to a pension office themselves.

How should the pay be designed?

The order is: (1) confirm the person's basic monthly amount → (2) subtract it from 650,000 yen → (3) the result is the ceiling on the monthly remuneration equivalent.

For example, with a basic monthly amount of 120,000 yen, no suspension arises until the monthly remuneration equivalent reaches 530,000 yen. At the pay levels of a small or medium-sized company, in most cases this stays in a range you never have to think about.

You do need to think about it in cases such as these.

Director's remuneration is high and the monthly remuneration equivalent exceeds 500,000 yen
Bonuses are large, so the monthly remuneration equivalent (which includes one-twelfth of the bonuses of the preceding 12 months) jumps
The basic monthly amount is large (a long period of coverage, or long periods of high remuneration)

Take particular care with bonus design. Because the monthly remuneration equivalent includes one-twelfth of the preceding 12 months' bonuses, even a once-a-year bonus has an effect across 12 months. Holding down monthly pay and loading the bonus instead is levelled out in the in-work old-age pension calculation.

From September 2027 the upper limit on the standard monthly remuneration rises from 650,000 yen to 680,000 yen, and it then rises in stages to 710,000 yen in September 2028 and 750,000 yen in September 2029. For people on high remuneration, keep an eye on the fact that a higher standard monthly remuneration also raises the monthly remuneration equivalent.

The coverage tests for short-hours employment are set out in What happens to social insurance when you hire someone for short hours, and the points to watch when someone comes in under a contract for services are in The line between outsourcing and employment is not settled by the contract.

Frequently asked questions

Q. Will the figure of 650,000 yen be the same next year?
A. The suspension adjustment amount is revised each fiscal year (Employees' Pension Insurance Act, Article 46, paragraph 3, proviso). Because it is revised in line with movements in nominal wages, the amount for FY2027 (令和9年度) and later depends on the outcome of that revision. The Ministry of Health, Labour and Welfare announces the following year's pension revision in late January each year, so please check it there.

Q. The person says "my pension will stop, so please keep me to 200,000 yen a month." How should I explain it?
A. The quickest route is to ask them to confirm their basic monthly amount. It can be checked on the annual pension notice (ねんきん定期便) or at a pension office. Once the basic monthly amount is known, subtracting it from 650,000 yen gives the ceiling below which no suspension arises. In most cases a level of 200,000 yen a month is far below that ceiling, so you can show on the spot that there is no need to hold anything down. Note that the person's own pension amount is personal information, so it has to be the person themselves who confirms it.

Q. I have newly hired someone over 70. What do I file?
A. They do not become an insured person under Employees' Pension Insurance, but they are within the scope of the notification for an employee aged 70 or over (70歳以上被用者該当届). For health insurance, someone under 75 does become an insured person, so a health insurance notification of acquisition of insured status is needed as well. For employment insurance, someone working 20 hours a week or more is covered as an older-worker insured person. The three schemes are treated differently, which is why filings are easy to miss here.

Q. Can the pension amount increase while the person is still working?
A. Periods worked with Employees' Pension Insurance coverage after age 65 are reflected in the pension amount, and the periodic revision while in work (在職定時改定) increases it from the October payment each year. The increase is itself then taken into account in the in-work old-age pension calculation. For an individual estimate, a pension office is the reliable place to ask. What we help with is working through how pay and bonuses can be designed so that a suspension does or does not arise. For fees, please see the fee schedule.

Sources for this article

厚生年金保険法 (Employees' Pension Insurance Act, Act No. 115 of 1954), Article 9, Article 14 item 5, Article 27, Article 44-3 paragraph 4, Article 46 paragraphs 1 and 3
厚生年金保険法施行規則 (Ordinance for Enforcement of the Employees' Pension Insurance Act, Ordinance of the Ministry of Health and Welfare No. 37 of 1954), Article 10-4, Article 15-2, Article 22-2
健康保険法 (Health Insurance Act, Act No. 70 of 1922), Article 3 paragraph 1 item 7, Article 36 item 3
高齢者の医療の確保に関する法律 (Act on Assurance of Medical Care for Elderly People, Act No. 80 of 1982), Article 50 item 1, Article 52 item 1
雇用保険法 (Employment Insurance Act, Act No. 116 of 1974), Article 37-2 paragraph 1
社会経済の変化を踏まえた年金制度の機能強化のための国民年金法等の一部を改正する等の法律 (令和7年法律第74号 / Act No. 74 of 2025)
Source for the 650,000 yen suspension adjustment amount: Ministry of Health, Labour and Welfare, "令和8年度の年金額改定についてお知らせします" (23 January 2026 / 令和8年1月23日); Japan Pension Service, "在職老齢年金の計算方法" (updated 1 April 2026)
Source for the relationship between deferral and in-work suspension: Japan Pension Service, "年金の繰下げ受給" (updated 12 August 2026)
The article number of the Cabinet Order setting out the specific method of calculating the deferral supplement has not been identified (unverified)
All provisions are the versions in force as confirmed on e-Gov法令検索 as of 13 August 2026

This article does not go so far as to decide who you should consult. Designing wages and bonuses, judging whether a filing is required, and managing standard monthly remuneration are the work of a Shakai Hoken Roumushi (Certified Social Insurance and Labor Consultant). For an individual's estimated pension amount and for the choice of whether to defer, we point you to the Japan Pension Service (a pension office); for the tax treatment of directors' remuneration, to a tax accountant — in each case to be confirmed or instructed by you directly. We do not accept referral fees. Fees for consulting 四葉社会保険労務士事務所 are set out in the fee schedule, and the questions we are asked most often in frequently asked questions.

This article is general information. Judgments that turn on your particular circumstances are made by a qualified professional after a consultation. Written by Joji Uramatsu (Shakai Hoken Roumushi (Certified Social Insurance and Labor Consultant), Gyoseishoshi (Certified Administrative Procedures Legal Specialist), Registered Real Estate Transaction Specialist).