One of the notable points in the Draft Law on Social Insurance of Vietnam 2023 is the proposal to reduce the minimum number of years of paying social insurance contributions to be eligible to receive pensions in Vietnam. So, what are the specifics of this proposal?
Clause 1, Article 71 of the Draft Law on Social Insurance stipulates that employees who pay compulsory social insurance and voluntary social insurance when meeting the conditions for retirement age and having paid full 15 years of social insurance shall be eligible for pension, applicable to both male and female employees.
Currently, the retirement age of employees in 2023 is full 61 years and 3 months for men and full 56 years and 8 months for women. Each year thereafter, the retirement age increases by 3 months for men until the age reaches 62 in 2028 and by 4 months for women until the age reaches 60 in 2035.
If the employee retires before the age, the employee will be reduced by 2% of the pension. If working beyond the retirement age, male employees will receive a maximum of 75% for 35 years of premium payment and 30 years for female employees (each year exceeding the 20-year mark will increase by 2% benefit level). If continuing to work beyond this period, the pension rate will not increase, but the employee will receive an allowance for the number of years of excess labor.
Regarding the one-time allowance when exceeding the 75% enjoyment level, the Draft Law on Social Insurance has 2 proposals that for each year of excess social insurance premium payment, it will be equal to 0.5 times the average salary as the basis for social insurance payment or equal to twice the average salary as the basis for social insurance payment for the calculation of the 75% benefit based on the number of years of payment higher than the retirement age (this option is based on the retirement age requirement, regardless of the number of years of contributions)
Reducing the minimum number of years of paying social insurance contributions in Vietnam
Regarding the proposal to reduce the minimum number of years of paying social insurance contributions in Vietnam to enjoy the pension, receiving the opinions of the people, the proposal stipulates that regardless of whether they are male or female employees, they only need to pay at least 15 years of social insurance contributions to meet one of the necessary conditions for retirement, but they still have to meet another condition, namely the retirement age.
For male employees participating in social insurance, in the period from the 15th to the 19th year, each year of participation in social insurance will be calculated as 2.25% of the pension enjoyment rate. Thereby, if they decide to retire from the 15th year of payment without considering other reductions or increases in benefits, male employees will receive a pension of 33.75% (45% – 2.25% x 5).
For female employees, the benefit rate will remain at 45% when paying for 15 years, similar to the current regulations. If paying for 20 years, female workers will receive 55%.
Male employees who have paid social insurance contributions for 20 years or more enjoy a 45% pension, plus 2% for each subsequent year of payment. To enjoy the maximum 75%, male employees must pay full 35 years and if this limit is exceeded, they will be paid a lump-sum allowance for the years in excess according to one of the two options mentioned above. To enjoy the maximum rate of 75%, female employees must pay social insurance contributions for 30 years.
From the total view, it can be seen that the general level of pension enjoyment will not change according to the latest proposal. The regulation on reducing the minimum number of years of paying social insurance contributions in the Draft Law on Social Insurance 2023 does not affect the benefits of the general employees in the direction of increase or decrease, but only for the purpose of allowing the employees to have more options to enjoy early pension through the trade-off of some percentage of the benefit rate.
However, for male employees, in the period from the 15th to the 19th year, the benefit rate is 2.25%, higher than the 2% rate of 0.25%, so it can be seen that the male group has better facilitated under this proposal, both potentially retiring early and achieving a higher rate partially if it decides to do so.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.