In life, there are times when large expenditures become necessary—marriage, childbirth, purchasing a car or home. To avoid being caught unprepared, it is important to plan your savings early. However, without strong motivation or a clear goal, saving tends to be put off. This is where the "Employee Asset-Building Savings Plan" (Zaikei Chokin Seido) offered as a company benefit comes in handy. This article introduces the outline of this system and focuses specifically on the "Housing Financial Savings Plan" (Zaikei Jutaku Chokin), covering its merits, demerits, and more. Even those who want to save for a home purchase but struggle to save should find this useful.
What Is the Employee Asset-Building Savings Plan?
The Employee Asset-Building Savings Plan is one of the programs based on the Act on Promotion of Workers' Property Accumulation. It aims to support employees in building assets through cooperation between the government and companies. There are three types:
- General Savings (Ippan Zaikei Chokin): Long-term savings deducted from salary over 3 or more years. No restrictions on use. Interest income is subject to taxation.
- Pension Savings (Zaikei Nenkin Chokin): For employees under 55, with a 5-year or longer accumulation period. Interest up to 5.5 million yen (combined with housing savings) is tax-exempt. Funds received in pension form from age 60 or later.
- Housing Savings (Zaikei Jutaku Chokin): For employees under 55, with a 5-year or longer accumulation period. Interest up to 5.5 million yen (combined with pension savings) is tax-exempt. Must be used for home purchase or renovation.
What Is the Housing Financial Savings Plan?
The Housing Financial Savings Plan (Zaikei Jutaku Chokin) is a savings program in which employees under 55 accumulate funds deducted from their salary for 5 or more years, with the purpose of purchasing a home or renovating their residence. Funds can only be paid out for home purchase or renovation purposes; other withdrawals are treated as general taxable withdrawals.
Key points include:
- Only available at companies that have introduced the system
- Limited to employees under 55
- Minimum contribution of 1,000 yen per month
- Accumulation period of 5 years or more required
- Interest on up to 5.5 million yen (combined with pension savings) is tax-exempt
- Can be used with the Employee Home Loan Program (Zaikei Mochiie Tenai Yuushi Seido) to borrow up to 10x the balance, maximum 40 million yen
Note: If you take maternity or childcare leave of 2 years or more, you must submit a "Savings Continuation Application" (Chokin Keizoku Tekiyo Shinkokusho) to the financial institution. When you return to work, you must resume contributions on the first scheduled contribution date.
Benefits of the Housing Financial Savings Plan
- Easier to build assets for home purchase/renovation: Contributions are automatically deducted from salary, making it easy to save consistently without extra effort. Some products can be started from as little as 1,000 yen per month.
- Tax-exempt interest: Interest on up to 5.5 million yen in principal is tax-exempt (unlike General Savings). This allows more efficient savings compared to standard bank accounts.
- Withdrawal is possible even for non-housing purposes: Unlike iDeCo or individual pension insurance, funds can be withdrawn for purposes other than housing. In such cases, only the past 5 years of interest becomes taxable.
- Access to the Employee Home Loan Program: Users can borrow up to 10x their balance (max 40 million yen) at low interest rates through the Zaikei Mochiie Tenai Yuushi Seido.
- Employer contribution grants (Zaikei Kyuufu): Employers may contribute up to 100,000 yen per employee. After 7 years, the contributions plus investment gains are paid out to the employee.
Drawbacks of the Housing Financial Savings Plan
- Low interest rates: Rates are typically 0.001–0.02%, which is very low compared to other financial products. The tax-exempt benefit is limited when interest itself is minimal.
- Risk of principal loss: Depending on the financial product (e.g., investment trusts, insurance), there is a risk of receiving less than the accumulated amount. Using deposits or fixed-term deposits avoids this risk.
- Vulnerable to inflation: With such low interest rates, the real value of savings may decline over time due to inflation.
Who Is the Housing Financial Savings Plan Suited For?
Suited for:
- People who want to save without hassle (automatic payroll deduction)
- People who worry they might spend money even when saving for a specific purpose
- People who want low-interest loans for home purchase
Not suited for:
- People who want to use savings freely (withdrawals are restricted to housing purposes for tax exemption)
- People who want high returns from their savings
Other Asset-Building Methods to Consider
iDeCo (Individual-type Defined Contribution Pension)
iDeCo is a self-directed pension savings plan. Contributions are deductible from income tax, investment gains are tax-exempt, and lump sum withdrawals at retirement are eligible for the retirement income deduction. However, funds cannot be withdrawn until age 60, and monthly management fees apply.
NISA (Tax-Exempt Small Amount Investment Account)
NISA is a system where investment gains are not taxed. From 2024, the new NISA provides both a "Tsumitate Toshi Waku" (regular investment allocation) and "Seichō Toshi Waku" (growth investment allocation), which can be used simultaneously, with increased annual investment limits and a permanent non-taxable holding period.
Insurance
Some insurance products (whole life, endowment, annuity, etc.) also serve as savings vehicles. Life insurance premium deductions can reduce income and resident tax. However, premiums are higher than term insurance, and long-term commitment is required.
Investment Trusts (Mutual Funds)
Investment trusts allow small-amount, diversified investment managed by professionals. While accessible and flexible, returns are not guaranteed and principal can be lost depending on market conditions.
Summary
The Housing Financial Savings Plan is a system supported by government and employer collaboration to help employees save for a home. Its main advantages are easy, consistent savings and tax-exempt interest. It is especially recommended for those who tend to spend their savings or want low-interest home loans. However, be aware of the drawbacks such as low interest rates, principal loss risk, and inflation vulnerability. Use this plan wisely as part of your overall asset-building strategy.
