Social Security Fund at risk of depletion

Vietnam's Social Security Fund could start running a deficit from 2021 and be completely depleted by 2034 without timely policy changes..

Vietnam Social Security Fund may start running a deficit from 2021 and completely
exhausted by 2034 (Illustration photo. Source: vnexpress.net)

The above recommendation was made at the announcement of the report “Social insurance fund balance forecast and legal recommendations” organized by the International Labor Organization (ILO) and the Ministry of Labor, War Invalids and Social Affairs (MOLISA) on August 22.

This report was prepared in response to the Government’s request for a financial assessment of the pension and death benefit fund managed by the Vietnam Social Security. The purpose of the assessment is to examine the current long-term solvency of the Social Security Fund and to make recommendations on the direction of social insurance policy reform.

Accordingly, the Report forecasts that the Vietnam Social Security Fund may start running a deficit from 2021 and be completely depleted by 2034 if there are no timely policy changes.

“The Government, employers and workers need to act urgently and work together to find ways to ensure pension payments now and in the long term,” said ILO Director in Viet Nam, Mr. Gyorgy Sziracki.

To ensure the sustainability of the Social Insurance Fund, the ILO recommends that Vietnam should move towards raising the retirement age for both men and women to 65. However, according to the ILO, this measure alone is not enough to improve the fund's situation. The ILO also recommends the need to revise the pension calculation method to reduce the payout ratio.

ILO believes that policy changes to extend the sustainability of the fund must be implemented while ensuring equity between public sector workers and private sector workers.

In addition, Vietnam also needs to increase the coverage of pension insurance programs and develop voluntary pension insurance programs.

At the workshop, Deputy Minister of Labor, Invalids and Social Affairs Pham Minh Huan assessed that the ILO's forecast will create a basis for planning social insurance policies in general and retirement policies in particular in Vietnam.

Deputy Minister Pham Minh Huan also said that the current law stipulates that all Vietnamese citizens who sign labor contracts of 3 months or more are eligible to participate in social insurance, but in reality, the implementation of the law is still limited. Currently, only 1/5 of the workforce has insurance.

Although compulsory social insurance revenue increased from 6.3 trillion VND in 2001 to 89.6 trillion VND in 2012, only 47% of the total number of enterprises paid compulsory insurance (in 2010). Meanwhile, in 2012, Vietnam began to enter the aging population phase. With the number of young people of working age decreasing and the “generous” pension system, the pension fund will be exhausted if the reform process does not provide necessary measures./.

According to Communist Party of Vietnam - LH