Mr. Nuno Cunha, a senior specialist on social security from the International Labour Organisation (ILO), granted an interview to reporters from the Social Insurance Newspaper about this issue.

According to the content of the draft social insurance policy reform project, the Ministry of Labour, Invalids and Social Affairs came up with two scenarios: increasing retirement age to 60 for women and 62 for men, or 60 for women and 65 for men, with a roadmap of increasing four months per year.

Reporter: In the current context, what is the viewpoint of the International Labour Organisation on Vietnam’s proposal to increase the retirement age?

Mr. Nuno Cunha:

We understand that people are not happy with an increase in retirement age and it is indeed a difficult decision. However, when we look at the life expectancy in Vietnam, particularly life expectancy at 60, we can see that today a woman who reaches 60 is expected on average to live until she is 81 years old.

Retiring at 55, women would receive on average a pension for more than 26 years. Imagine that someone enters the labour market at 25, they would contribute a maximum of 30 years, probably less. A contribution of 30 or 35 years for a pension payment of 26 years is just not possible. It is not difficult to understand the challenge that this poses to a pension system.

And with time this situation will get more dramatic. Not only life expectancy will continue to increase, but the ratio of working adults to elderly people will drop to 3 to 1. We do not see how the system can survive if parameters like retirement age are not adjusted.

At the same time, we understand the challenges to this, and recognise that change will need to be a gradual process. One solution is to increase retirement age by three months every year. If the changes start to be implemented in 2020, it would mean that by 2024 women will retire at 56 instead of 55, and at 57 by 2028. This gradual approach will give time for people and the economy to adjust.

However, there is a problem that the ILO can see is the difference in the retirement age of men and women. Many people say it is fair to allow women to retire early because they have to take care of their family in addition to working. Some agree that women need early retirement because their health is not as good as men. But in fact, women have longer life expectancy than men, Cunha said.

Women’s health after child care is often equal to or even better than men’s. If they retire early, women will have lower pensions than men due to less contribution time, and normally women are paid lower than men while doing the same job while in fact women have longer life expectancy than men. Therefore, the most equitable approach is working toward gradually balancing the retirement age between men and women, allowing women to retire with higher pensions.

Reporter: Many opinions say that workers in Vietnam are forced to work exhaustedly while their incomes are very low. Many employees are laid off or forced to leave jobs at the age of 35-40. Will raising the retirement age make this group more disadvantaged? What is your opinion about this issue?

Mr. Nuno Cunha:

If employees are bled dry and fired or forced to stop work at the age of 35-40, you have to agree with me that the proposal to increase the retirement age from 55 and 60 at present to 56 and 61 in 2024 will have no impact on the aforesaid matter. What the pension system can support this group is allowing them to receive pensions at the age of 35-40. But this is obviously impossible.

However, there are other tools to support employees such as providing unemployment insurance for them in case of dismissal, improving working conditions, enhancing working capacity, and changing the working method.

Vietnam has a rapidly aging population. The society and economy need to pay more attention to using the potential of each person in a better way. It is important to ensure a working environment adaptable to each worker. Every citizen has their own concerns and worries when the retirement age increases, Cunha said.

However, it is necessary to understand the impacts of these changes, and the structural issues that require reforms and other policies, he added.

Reporter: Given the hot issue of increasing the retirement age in Vietnam, how should we view increasing labour productivity? Does the increase of the retirement age play a role in increasing labour productivity?

Mr. Nuno Cunha: I don’t think there is any proof for the assumption that increasing retirement age will have negative impacts on the economy. I don’t think older workers are necessarily less productive. We may have to shift them to different positions but let’s look at the issue this way: How do younger people get trained if not by those who have experience and share it? We should shift the older workers to a place where they can share their knowledge, and where their experience can be beneficial.

Given the case of such a gradual adjustment, we do not expect a big impact on productivity. The issue of productivity is an important factor for the future of the country and for sure, other policies will be put in place.

In fact, with its current ageing population, Vietnam will face future labour shortages. Increasing retirement age can help to cope with this challenge.

Reporter: One of the weaknesses of Vietnam’s social insurance system is its lack of coverage. What is your recommendation to improve that?

Mr. Nuno Cunha: More important than the discussion on retirement age is the number of elderly people that still don’t benefit from any pension.

One lesson we see from other countries is that it is very difficult for a country to rely on people to make contributions voluntarily. For employers, it looks like a business expense. For workers, it looks like something that reduces their monthly pay. Many people do not see the need or urgency of a pension system until they are old.

Some of them can contribute, and they should be asked to do so. The health insurance system in this country shows it can be done, if people see immediate pensions. This is why the short-term benefits are so important, like maternity, sickness and possibly future family benefits.

In terms of extension of coverage there are various mechanisms in place to achieve this. For instance, there should be some benefits for everybody in the country that are paid by the State. You have to have a basic level of protection for everyone so nobody falls into poverty, for instance by expanding the social pensions to those who are already old and did not have the chance to pay contributions to the system when they were young.

This largely benefits the women and men in informal sectors. So when you want to mitigate from State intervention to people actually putting up contributions, you could tell everyone that as a member of society, and also because directly or indirectly everyone contributes to the development of the society, you have the right to a minimum level of protection offered by the State, and on top of that, you may have higher benefits that come from your wages.

Thank you very much.