Anticipating social reactions if retirement age is increased

There are still many concerns surrounding the amendments to the Social Insurance Law (SIL) in the direction of expanding the contributory subjects to reduce the risk of fund bankruptcy.

At the Northern conference on policy dialogue in amending the Social Insurance Law held in Hanoi today, the National Assembly's Committee on Social Affairs pointed out that to overcome shortcomings in social insurance policies, there needs to be significant adjustments in the Social Insurance Law.

The Committee proposed expanding the scope of social insurance contributions to include seasonal workers, part-time workers at the commune level, foreign citizens working in Vietnam, and voluntary social insurance...

The draft law also continues to propose a roadmap to increase the retirement age, from 62 for men to 62 for women, to 60 for women, to extend the period of social insurance payment to receive pensions for workers.

The reason for these proposed changes is the risk of imbalance in the social insurance fund. The International Labor Organization (ILO) predicts that this fund will start to run short from the 2020s and will run out of funds by the mid-2030s.

Mr. Bui Sy Loi: The Social Insurance Fund is unbalanced because of “paying little and receiving much”. Photo: Le Anh Dung

Speaking at the conference, Mr. Le Hong Huyen, Director of the Social Affairs Department, Central Economic Committee, frankly asked the question: Why is there a concern about the fund "breaking" in 2034? It is necessary to prove that it will break, what is a break, what is the cause, how to adjust laws and policies..., in a transparent way "so that everyone voluntarily acts to protect their pensions".

Vice Chairman of the Committee for Social Affairs Bui Si Loi pointed out: Low retirement age leads to short social insurance payment period but long pension period due to increased average life expectancy of people.

The actual retirement age of Vietnamese workers is currently lower than the regulation (men 60, women 55 years old): men 55.2 years old, women 51.7 years old, average 53.4 years old. The actual social insurance payment period of workers is short (men: 28 years, women: 23 years), while the pension period is long (the average number of years of life for men from 60 is 18.1 years old; women from 55 years old is 24.5 years), and the accumulated pension only ensures payment for 12-13 years.

Mr. Mai Duc Chinh, Vice President of the Vietnam General Confederation of Labor, also said: The Social Insurance Fund is having to "shoulder" pensions for the police and military sectors as well as deal with cases of provincial staff reduction and early retirement - meaning it still has to take care of those for whom the state budget should be responsible.

Thus, according to Mr. Bui Si Loi, the biggest problem leading to the imbalance of the basic social insurance fund is due to "paying little, receiving much".

Ms. Nguyen Nguyet Nga, senior expert of the World Bank (WB) in Vietnam, pointed out: The collection of social insurance contributions is not effective, only reaching 60-65% in the mandatory area; the fund investment interest is lower than the average GDP growth and inflation rate.

The WB representative supports the plan to raise the retirement age but also emphasizes that this is only one of many solutions, while the most important is still reforming the current ineffective social insurance system.

Mr. Nguyen Van Son, member of the Committee for Social Affairs, shared this opinion: If 100% of social insurance contributions are fully implemented in the compulsory sector, will the fund be shaken and at risk of bankruptcy? According to Mr. Bui Si Loi, this can help increase the fund but still does not affect the fund balance because of the principle of "contributing and receiving" of the social insurance fund.

Deputy Minister Nguyen Minh Huan of the Ministry of Labor, Invalids and Social Affairs also stated that collecting 100% of the compulsory areas, or even expanding the scope of beneficiaries, would only prolong the time for the fund to "collapse" if the situation of "paying less but receiving more" could not be overcome.

Mr. Nguyen Van Son affirmed that voters and workers will not like raising the retirement age, but admitted that with the above analysis, "when it is necessary, we will still have to accept it."

However, he warned: When France raised the retirement age, society suffered considerable unrest, and parliamentarians anticipated that reaction when deciding that raising the retirement age was the only option. “Can Vietnam avoid that situation?”, Mr. Son asked.

Mr. Bui Si Loi said he has proposed that the Government summarize and evaluate so that when conditions are met, the retirement age can be expanded according to a roadmap suitable to the socio-economic situation, health conditions and population aging process.

The Committee on Social Affairs will continue to organize policy dialogues in the North and South to complete the draft revised Social Insurance Law to be submitted to the National Assembly at the next session.

According to Vietnam.net