Looking towards equality in payment – enjoyment

According to Clause 2 Article 56 and Clause 2 Article 74 of the Law on Social Insurance in 2014, from January 1, 2018, to get the maximum rate of 75 percent of the average monthly salary as pensions, male employees must have paid social insurance premiums for 31 years in 2018, 32 years in 2019, 33 years in 2020, 34 years in 2021, and 35 years from 2022 onwards. For female employees, they must contribute social insurance premiums for 30 years from 2018 onwards.

The adjustment of the formula has some advantages which better ensure the payment-enjoyment principle and the sustainability of the retirement and survivor funds. The rate of additional pension enjoyment calculated for each year of paying social insurance premiums after the 20th year for men and after the 15th year for women will be the same (2 percent), fairer than the 2006 Law on Social Insurance (men 2 percent, women 3 percent).

However, the provisions of the 2014 Law on Social Insurance raised the comparison between female and male workers and between female workers retiring before and after January 1, 2018.

Specifically, the calculation of pension enjoyment for men changes gradually over five years, while that for women is implemented in 2018. This may lead to some female workers retiring in 2018 receiving a lower rate of pensions than those who retired in 2017 and had the same years of social insurance payment (reducing by 1-10 percent).

It is predicted that in 2018, there will be about 60,000 retired male workers, including about 20,000 having paid social insurance premiums for less than 31 years and enjoying a lower rate of pension than those who retired in 2017 and had the same period of payment.

Also in 2018, about 50,000 female employees are estimated to retire, with more than 21,000 having paid social insurance premiums from 15 to 30 years and enjoying a lower rate of pensions than those who retired in 2017 and had paid for the same amount of time.

It is estimated that some 4,000 people will be affected with the rate of pension enjoyment lower from 5-10 percent.

The calculation of pensions for retired female workers in 2019-2021 is similar to those retiring in 2018, which means lower from 1 to 10 percent compared to female employees who retired in 2017 and had the same payment period.

Female workers retiring in 2019 could enjoy lower rates of pensions from 1 to 6 percent compared to male ones as there is no roadmap for them. The rate of difference between male and female workers’ pensions in the following years will be 1-4 percent by 2020, and 1-2 percent by 2021.

The number of female workers starting to receive pensions in 2019-2021 (with lower rate of pensions than men) will be 18,690 in 2019, 13,851 in 2020, and 5,179 in 2021. Until 2022, there will be equal calculation of pensions for both genders.

Making adjustments to make up for female workers’ pension

According to Article 57 of the 2014 Law on Social Insurance, the Government shall stipulate the adjustment of pension based on the increase in the consumer price index and economic growth to suit state budget capacity and social insurance fund. This means the Government shall adjust pension regardless of the groups of pensioners and the adjustment level. Therefore, this is also a basis for the Government to adjust pension for women whose retirement starts on between January 1, 2018 and December 31, 2021.

If a female worker begin receiving pension in 2018 and has made social insurance contributions for 25 years, her pension in 2018 is equivalent to 65 percent of the salary of the month preceding her leave on which social insurance premiums are based. The pension of those who paid social insurance premiums for 25 years but retired in 2017 is 75 percent. This rate in 2018 is down 10 percent from 2017.

If the roadmap for reducing the rate based on which pensions are given is expanded to five years, from 2018 to 2022, female workers’ pensions will decline by only 2 percent (one-fifth of 10 percent) each year annually. Therefore, pension entitlements will fall 2 percent for female workers who begin to receive pensions in 2018, 4 percent in 2019, 6 percent in 2020, 8 percent in 2021 and 10 percent in 2022.

Therefore, on the basis of tasks assigned by the National Assembly (NA), the Government will adjust to "compensate" the amount of money corresponding to the pension difference (10 percent) as calculated according to the Law on Social Insurance.

If this compensation is conducted as in the same roadmap for men, the compensation rate will be 8 percent for women retiring in 2018, 6 percent in 2019, 4 percent in 2020 and 2 percent in 2021. They will not receive compensation for the pension difference as from 2022 the compensation payment will end as in the roadmap for men.

However, this calculation method only makes up for the rate of the salary based on which pension is given. If retirement pension is adjusted, a higher rate of compensation must be made, 12.31 percent, if a person starts to receive pension in 2018. If a person starts to receive pension in the following years, the respective adjustment rates are 9.23 percent in 2019, 6.15 percent in 2020 and 3.08 percent in 2021. This method is also used to calculate the adjustment level for those with social insurance contributions ranging from 20 years to 29 years and six months.

According to a Government report, the number of female workers starting to receive pensions between 2018 and 2021 and having paid social insurance premiums for between 19 years and six months and 20 years is nearly 91,600. The number is 20,500 in 2018, 22,100 in 2019; and 23,700 in 2020. Thus, there will be a need for funding of about 80 billion VND (27.8 billion VND in 2018, 23.7 billion VND in 2019, 18.1 billion VND in 2020, and 10.3 billion VND in 2021).

With regard to this issue, according to a resolution issued at the 5th session of the 14th NA, the parliament assigned the Government to promulgate regulations on the implementation of the pension adjustment policy for female workers who start receiving pensions from January 1, 2018 to December 31, 2021. Funding for this adjustment will be provided by the social insurance fund.

"This is a special policy which is implemented only for a certain period of time and for a certain group, in order to ensure the interests of female workers who are adversely affected by changes in the way pensions are calculated while at the same time, better implementing the gender equality policy," NA Chairman Nguyen Thi Kim Ngan stressed.

The NA approved the resolution, which agreed to issue 22.09 trillion VND worth of Government bonds in 2018, 2019 and 2020 to recognise debts to the Vietnam Social Insurance regarding the payment of social insurance premiums for persons working in the State sector before January 1, 1995. Of that sum, 6 trillion VND is in 2018, 7 trillion VND in 2019 and 9.09 trillion VND in 2020. The annual Government bond issuance level must be within the State Budgetbudget’s total borrowing level as decided by the NA in the NA’s Resolution 25/2016/QH14 on the five-year national financial plan in 2016-2020 and the NA’s resolution on the annual state budget estimate, ensuring public debt within the permitted level.

Interest on the debt of 22.09 trillion VND pending the Government bond issuance is calculated as from January 1, 2016 and according to the interest rate of Government bonds with the same term issued in December 2015. This interest is paid annually or cumulatively until the end of bond terms, and more Government bonds will be issued to add to the debt to the Vietnam Social Insurance. The Government shall determine the interest payment plan and report it to the NA for decision when it submits the annual State budget estimate, ensuring that the plans on the use and preservation and development of the social insurance fund will not be affected.