Many people benefit from new pension calculation
The Social Insurance Law 2024, effective from July 1, 2025, stipulates a new way of calculating pensions, thereby opening up opportunities for many workers to benefit.
A representative of Vietnam Social Security said that the current pension calculation is implemented according to the 2014 Social Security Law. Accordingly, the monthly pension of employees who meet the retirement age requirements and have paid social insurance for at least 20 years (as prescribed in Article 54 of this Law) is calculated as follows:
The pension is equal to 45% of the average monthly salary for social insurance contributions, corresponding to 15 years of social insurance contributions, then 2% is added for each additional year, up to a maximum of 75%.
In case the employee is eligible for early retirement, for each year of early retirement, the rate of early retirement is reduced by 2%. In case the retirement age is an odd number of months up to 6 months, the rate of reduction is 1%, and for more than 6 months, the percentage of early retirement is not reduced.
However, from July 1, 2025, the regulation on the minimum number of years of social insurance contributions to receive a monthly pension will be reduced from 20 years to only 15 years, so the pension calculation method will also change.
Specifically, employees who have participated in social insurance for 15 years are entitled to receive a pension, so the law adds a method to calculate the pension level.
Male workers who have paid social insurance for 15 years to less than 20 years, the monthly pension is equal to 40% of the average salary used as the basis for social insurance payment, corresponding to 15 years of social insurance, then for each additional year of payment, 1% is added.
A labor and salary expert said that calculating the social insurance participation period to only 15 years instead of 20 years as in the current Social Insurance Law will allow more workers to receive pensions when they retire.
Although the benefit of 15 years of social insurance contributions is low, in addition to the pension being adjusted annually, retirees are also entitled to free health insurance. This is an important condition to reduce the burden of expenses when sick or infirm in old age.
Pension is calculated for the entire period of social insurance participation.
Also from July 1, 2025, the method of calculating pensions based on the average monthly salary of social insurance contributions in the State sector will change according to new regulations of the new Social Insurance Law.
For those participating in social insurance before January 1, 1995, the average monthly salary for social insurance contributions of the last 5 years before retirement is calculated; for those participating in social insurance from January 1, 1995 to December 31, 2000, the average monthly salary for social insurance contributions of the last 6 years before retirement is calculated.
Employees participating in social insurance from January 1, 2001 to December 31, 2006 will be calculated on the average of monthly salary for social insurance contributions of the last 8 years before retirement; employees participating in social insurance from January 1, 2007 to December 31, 2015 will be calculated on the average of monthly salary for social insurance contributions of the last 10 years before retirement;
If participating in social insurance from January 1, 2016 to December 31, 2019, the average monthly salary for social insurance contributions of the last 15 years before retirement will be calculated; if participating in social insurance from January 1, 2020 to December 31, 2024, the average monthly salary for social insurance contributions of the last 20 years before retirement will be calculated;
For those who participate in social insurance from January 1, 2025 onwards, the average monthly salary for social insurance contributions for the entire period will be calculated. Similar to the business sector, for those who participate in social insurance from January 1, 2025 onwards, the average of the entire contribution period will also be calculated.
A representative of Hanoi Social Insurance said that adjusting the pension calculation method (from the average of the last 5 years to the entire period of social insurance contributions) is consistent with the salary reform policy and ensures the rights of workers.
Due to the low salary in the previous period, if the social insurance payment period is included, the pension will be very low. This is disadvantageous for workers, especially those working in the State sector.
Currently, the salary level in the State sector has been raised, so calculating the whole process according to the revised Law on Social Insurance is appropriate.
According to the Ministry of Labor, War Invalids and Social Affairs, one of the principles of social insurance is that the benefit level is calculated based on the contribution level and the contribution period. The regulation that the pension level is calculated based on the pension rate and the average salary used as the basis for social insurance contribution during the entire contribution period is consistent with the principle of contribution and benefit.
As of December 2023, there are 1.27 million pensioners (retiring and receiving a salary from the State). The average pension of this group is 6.1 million VND/month.
In both the public and private sectors, pensioners from the Social Insurance Fund receive an average of 5.6 million VND/person/month.
