Join social insurance or save money?

First of all, it must be affirmed that directly comparing one's products with those of another enterprise is a violation of Articles 43 and 45 of the Competition Law.

Looking from international experience, in many countries with developed economies, modernized industries at the most advanced level, market economies are fully established, operating with all inherent laws. The question is, do people in those countries compare the way some of us do?

In those countries, with a series of big names in commercial insurance, life insurance, with large-scale commercial banking systems, why is the social insurance policy still maintained sustainably by countries and always considered an important policy that the State must maintain and implement, in addition to the private and commercial insurance system?

More importantly, pensions from social insurance are still the basic source of income for all elderly people in developed countries; income from commercial insurance or savings from banks has never been enough to ensure social security for the whole community in every country.

Pensions received from social insurance are still a basic source of income for all elderly people. Photo: Internet

It must be affirmed that the calculations that participating in social insurance to receive pension brings lower benefits when retiring than the benefits when they save or participate in life insurance for 20 years are completely wrong because there is a huge difference between social insurance and saving or buying life insurance:

- The biggest difference is in purpose: Social insurance is a non-profit insurance type and the Social Insurance fund is protected by the State, meaning it cannot go bankrupt. Meanwhile, banks operate for profit, are the most profitable business and can also go bankrupt. In case of bankruptcy, savings deposits can be lost.

- When making a savings deposit, participants receive an interest amount according to the term of the deposit. After about 2 to 3 decades, the value of the remaining principal amount is very little.

This is the opposite of social insurance where social insurance contributions are returned by adjusting the Consumer Price Index (CPI) each year according to government regulations and become the basis for calculating pensions. During the period of participation in social insurance, when death occurs, the time of social insurance contributions is recorded to calculate the death benefit.

- Once you have received your pension, it is adjusted periodically according to the consumer price index and economic growth. In fact, the State adjusts and increases your pension almost every year.

In the period from 2003 to present, the Government has adjusted pensions many times with increases ranging from about 7.5 to 9.3 times (depending on the target group) compared to the pension level in 2002.

Medical examination and treatment using health insurance brings many benefits to people. Photo: Internet

In addition, during the entire period of pension benefits, employees are paid by the Social Insurance Fund to issue health insurance cards and enjoy equal medical examination and treatment benefits with everyone else, regardless of the participation fee, type of disease, etc. When the beneficiary passes away, the person in charge of the funeral will also receive a funeral allowance equal to 10 months of basic salary at the time of death, and relatives will receive a death benefit (monthly or one-time allowance).

This is the outstanding advantage of social insurance. For savings, the interest amount is fixed and the value of the interest will gradually decrease due to the impact of inflation.

To compare the benefits of investing when participating in voluntary social insurance compared to saving money of a social insurance participant and saving money, we did a calculation with the following realistic assumptions:

- Pay social insurance and make savings for 20 years starting from 2008 (2008 is the first year of implementing voluntary social insurance) with the savings amount equal to the social insurance payment amount maintained for 20 years and the social insurance payment amount is calculated by the percentage rate according to the regulations of each period based on the amount the participant chooses as the basis for social insurance payment, which is 5,000,000 VND.

- Savings interest rate: 7%/year; calculated based on compound interest each year.

- The index of adjusting social insurance contributions according to the consumer price index (CPI) is 5%/year from year t-1 (CPI index increases on average 8.1%/year, from 2008 to present);

- Pensioners from 2028 when they reach 55 years old, the pension rate for women is 55% (for men at 60 years old, the rate is 45%);

- Average pension adjustment increase: 7%/year (lower than the lowest increase from 1993 to 2017).

- Expected life expectancy after retirement age is 20 years;

- The basic salary in 2048 is 10,000,000 VND, an increase of 8.27%/year (from 2008 to June 2017, the average basic salary increase was 13.7%/year);

- One-time death benefit equal to 3 months' pension at the time of death (lowest level according to regulations).

- Pension benefits are calculated according to current regulations. Result: With the investment amount of 249,600,000 VND, but to participate in voluntary social insurance, you will receive social security for life with a total benefit of 2,160,690,000 VND for women and 1,786,019,000 VND for men; more than savings with a very large amount of 973,333,000 VND for women and 598,303,000 VND for men).

In case of compulsory social insurance participation, the benefits are huge because the amount of money the employee has to pay for social insurance is only 90,763,600 VND, because the rest is paid by the unit.

In addition, during their pension period, employees are examined and treated by the Health Insurance Fund at an amount that cannot be counted because everyone knows that when they are on the other side of life, the cost of medical care for most elderly people is very high./.