The Ministry of Labour Invalids and Social Affairs has issued a document responding to concerns of voters in Quang Binh and Thua Thien-Hue provinces regarding retirement pension gaps, as well as adjustments of retirement pension and social insurance benefit. 

Regulations on retirement pension

Earlier, voters in Thua Thien-Hue province asked the Government to promptly adjust regulations related to the group receiving below 2 million VND in retirement pension and social insurance monthly benefit from January 1, 2017, to ensure equality for beneficiaries.

In this regard, the ministry said social insurance benefit is based on the level and duration of social insurance contribution as well as sharing between social insurance participants. Therefore, monthly pension is calculated based on the amount and duration of labourers’ contribution to social insurance.

Adjusting retirement age is necessary (Source: Internet)

In implementing Resolution No. 99/2015/QH13 of the National Assembly, the Government issued Decree No. 55/2016/ND-CP on June 15, 2016 on the adjustment of retirement pension, work capacity loss benefit, monthly allowance and support for pre-preschool teachers who worked before 1995.

The Ministry of Labour, Invalids and Social Affairs also issued Circular No. 23/2016/TT-BLDTBXH on July 15, 2016 to guide the adjustment of retirement pension, social insurance benefit and monthly allowance. The adjustment of retirement pension and allowance of the group receiving below 2 million VND per month was applied only for those who enjoyed the benefits from January 1, 2016 to December 31, 2016.

Based on Resolution No. 27/2016/QH14 dated November 11, 2016 of the National Assembly on State budget estimate in 2017, the Government issued Decree No. 76/2017/ND-CP on June 30, 2017 to increase retirement pension, social welfare benefit and monthly allowance by 7.44 percent compared to the level in June 2017. The resolution took effect on July 1, 2017.

The Ministry of Labour, Invalid and Social Affairs also issued Circular No. 18/2017/TT-BLDTBXH on June 30, 2017 to guide the implementation of the decree. In implementing Resolution No. 49/2017/QH14 dated November 13, 2017 of the National Assembly on State budget estimate in 2018, the monthly minimum wage would be adjusted up, from 1.3 million VND to 1.39 million VND, as from July 1, 2018. Retirement pension, social insurance benefit and monthly allowance (which are sourced from the State budget) will also increase at the same level.

The Ministry of Labour, Invalids and Social Affairs is working with ministries and agencies to devise a draft decree on adjusting retirement pension and monthly social insurance allowance, to be submitted to the Government. The ministry has also been assigned to build a project reforming social insurance policies, which is slated to be submitted to the 12^th Party Central Committee at the seventh plenum in May 2018. Opinions of voters will still be considered during the research and completion of social insurance policies in the future.

In this regard, the Ministry of Labour, Invalids and Social Affairs said the 2014 Law on Social Insurance was adopted when Vietnam was experiencing “golden population”. But the country has entered the aging phase at a rate said to be one of the world’s fastest. In addition, the number of people getting retirement pensions is growing at a higher rate than that of participants in the social insurance scheme; at the same time, life expectancy of Vietnamese is on a rise, meaning the period during which a retiree receives pension is getting longer.

Moreover, the social insurance scheme was originally designed for government employees and funded by the state budget. It has been lately expanded to cover those from other sectors but its policies have not been accordingly adjusted. The ratio between the level of monthly pension a retiree receives and his average social security contribution is much higher than that of other countries with similar social security premium payment, which leads to the growing risk of unbalanced social insurance funds.

According to the Ministry of Labour, Invalids and Social Affairs, one of the objectives set in the revision of the 2006 Law on Social Insurance was making policy changes to ensure the balance of the fund for retirement pension and death benefit in the long run, which were either increasing the monthly premium or decreasing the monthly pension. The increase in the rate of premiums the business must pay for retirement pension and death benefit fund was introduced between 2010 and 2014 (under the 2006 Law on Social Insurance). This new rate was believed to reach the “ceiling” that the businesses can afford to pay. It would be very difficult to raise this rate again. Hence, to maintain the balance of the social security fund, it was necessary to consider adjusting the retirement pension rate.

However, it was difficult to reduce the maximum retirement pension from 75 percent to 50-55 percent of the average monthly income, the global average rate, as recommended by international organisations. Thus, the amended Law on Social Insurance adopted by the National Assembly in 2014 maintains the maximum rate of 75 percent but extends the duration one is required to pay social security premiums to 5 more years for both men and women.

From January 1, 2018 onwards, male and female workers will be eligible to receive a monthly pension of up to 75 percent of the average monthly salary if they have paid social insurance premiums for full 35 years and 30 years, respectively, instead of 30 years and 25 years according to previous regulations. Voters from Quang Binh province voiced concerns that workers will suffer disadvantages from such change and proposed that the National Assembly consider revising the Law on Social Insurance.

According to the provisions at Clause 2, Article 56 and Clause 2, Article 74 of the 2014 Law on Social Insurance, from 2018, to receive the maximum monthly retirement pension equal to 75 percent of the average monthly income, a male employee must pay his social insurance premiums for full 31 years for those retiring in 2018; for full 32 years for those retiring in 2019; for full 33 years for those retiring in 2020; full 34 years for those retiring in 2021; and for full 35 years for those retiring in 2022 onwards.

For female employees, the number of years paying social insurance premiums to get the maximum pension rate of 75 percent must be 30 years. A limitation in the 2014 Law on Social Insurance is that it has a roadmap for adjustment regarding male employees, but not any for female employees. Therefore, there will be big differences between the levels of retirement pension offered to female employees who retire before January 1, 2018 and those retiring after that but still pay their contributions for the same length (less than 30 years).

In this regard, the Ministry of Labour, Invalids and Social Affairs has studied and assessed the impacts of these provisions on employees. It has proposed a plan to settle this issue to the government. On November 21, 2017, the government submitted report No. 548/BC-CP to the National Assembly on how to fix the differences between the retirement pension levels for pensioners who retire before and after January 1, 2018 in accordance to the 2014 Law on Social Insurance.

International Cooperation Department