Proposal to raise the retirement age to 62 for men and 60 for women.

The Ministry of Labour, Invalids and Social Affairs has just proposed amendments to current regulations and suggested allowing a phased increase in the retirement age for workers, starting in 2021.

According to the current Labor Code, the normal retirement age is 60 for men and 55 for women.

Over the years, during the drafting process of the 2007 Gender Equality Law, the 2012 Labor Code, and the 2014 Social Insurance Law, the issue of increasing the retirement age has been raised many times.

The proposal to raise the retirement age is considered one of the solutions to ensure the long-term balance of the pension and death benefit fund. This is because maintaining the current regulations on contribution rates, benefit levels, and contribution and benefit periods would lead to fund imbalances.

Calculations by the International Labour Organization (ILO) show that from 2023, the pension and death benefit fund will fall into a state where annual revenue is insufficient to cover expenditures, beginning to draw from the surplus fund to make payments; from 2034, the surplus fund will be completely depleted, leading the state to have to allocate budget to compensate for the shortfall.

Specifically, a man with 30 years of social insurance contributions, retiring at age 60, will receive a pension equal to 75% of his average salary on which social insurance contributions were made. Over 30 years (360 months) of participation, contributing 22% of his salary each month, the employee contributes 79 months of average salary to the fund. This amount is only enough to cover 105 months of pension payments (or 9 years); if interest on the fund is included, it could cover 12 years of pension payments.

While the average retirement age for male workers in our country is 54.2 and for female workers 52.6, the average life expectancy for male workers is 70.8 years (16.6 years of pension entitlement) and for female workers is 76.1 years (23.5 years of pension entitlement).

To ensure the financial sustainability of the fund, if the retirement age is not increased, there are only two options: raise the contribution rates of employees and businesses, or reduce the pension benefit levels.

According to the Ministry of Labour, Invalids and Social Affairs, raising contribution rates is very difficult because it increases the financial burden on workers and reduces the competitiveness of businesses. Reducing benefit levels also makes it difficult to ensure a decent standard of living for pensioners.

The Ministry of Labour, Invalids and Social Affairs believes that the proposed solution is to raise the retirement age to balance the contribution period, contribution level, and benefit period and benefit level.

Concerns about raising the retirement age.

In the draft submission to the Prime Minister, Minister Dao Ngoc Dung stated that many opinions suggested not increasing the retirement age because many workers do not want to extend their working time and wish to retire at the current age to receive a pension. After that, if they work further, they will have two sources of income.

Extending the retirement age is also considered inappropriate for workers in manual labor jobs. For civil servants and government officials, it leads to a tendency to cling to power.

Minister Dao Ngoc Dung stated that, due to differing opinions, the policy is expected to present two options regarding the retirement age for workers employed under normal working conditions.

Option 1 maintains the current age, with men reaching 60 years old and women reaching 55 years old. Option 2 sets the age at 60 for men and 55 for women, and from January 1, 2021, the working age increases by 6 months each year until men reach 62 years old and women reach 60 years old.

The drafting agency stated that the draft is expected to be submitted to the National Assembly during the May 2019 session and voted on during the October 2019 session.