Why must the pension calculation method change from January 1, 2018?

Changing the way pensions are calculated, effective from January 1, 2018, is a step towards the goal of improving the financial situation of the Social Insurance Fund to be more sustainable.

The Law on Social Insurance stipulates that the number of years of social insurance contribution corresponding to the rate of 45% for female workers is 15 years; for male workers, the period of social insurance contribution corresponding to the rate of 45% is regulated with a specific roadmap: 16 years in 2018, 17 years in 2019, 18 years in 2020, 19 years in 2021, and 22 years in 2022, corresponding to the rate of 45%. After that, for both men and women, each year of social insurance contribution is calculated by an additional 2%, up to a maximum of 75%.

This regulation will take effect in just a few months, but up to now, there are still many concerns and controversies. Many people believe that such a regulation will be disadvantageous for those who are close to retirement age. Therefore, in reality, many people have "run" for documents and procedures to retire before January 1, 2018.

Why is it necessary to extend the social insurance payment period (which means that employees have to extend their working time)?

Mr. Do Ngoc Tho - Deputy Head of the Social Insurance Policy Implementation Department (Vietnam Social Insurance), said: "In the current context of population aging, the issue of fund balance must be discussed specifically. The Social Insurance Fund is formed on the basis of contributions from participants and employers used to pay benefits to employees. The question is how sustainable is the fund with contributions and payments like in the past?

Specifically, our maximum pension rate is among the highest in the world. Experts have repeatedly recommended that Vietnam needs to change the way pensions are calculated to make the pension and death benefit fund more sustainable, not only for this generation but also for future generations.

Therefore, according to Mr. Do Ngoc Tho, changing the way pensions are calculated from January 1, 2018 is a step towards the goal of improving the financial situation of the Social Insurance Fund to be more sustainable and safer.

To ensure fairness in paying and receiving social insurance, according to Mr. Do Ngoc Tho, we need to clearly define the working age and retirement age. Currently, our average retirement age is low, but many retired people still continue to participate in the labor market and work to generate income. Therefore, lowering the retirement age further in the context of Vietnam's population aging rate being among the fastest in the world, and life expectancy increasing at an admirable rate is impossible. While we have maintained this retirement age since 1961-1962 until now, we must also review and re-evaluate.

Explaining the reason for the low average retirement age, Mr. Do Ngoc Tho said that there are many people retiring early due to reduced working capacity, so there should be measures to limit early retirement. That is also a solution to ensure better fund balance. But in reality, workers always want to retire early to have a stable pension. Once they have a pension, they return to work to generate income.

The 2014 Social Insurance Law has a roadmap to increase the retirement age for early retirement cases with a reduction in working capacity of 61% or more. With social insurance and health insurance, if you want to retire early, you have to go for an assessment. The problem here is that almost everyone who goes for an assessment reaches the 61% rate.

Deputy General Director of Vietnam Social Security Pham Luong Son said that it is necessary to pay attention to the health assessment rate. Because a procedure is set out and almost everyone passes, it is also necessary to consider whether it is still necessary or not.

Also related to the extension of working time, Mr. Vu Quang Tho - Director of the Institute of Workers and Trade Unions (Vietnam General Confederation of Labor), cited the survey results with 5,000 questionnaires distributed in 2017, nearly 90% of workers responded that the current social insurance regime should be implemented (55 years old for women and 60 years old for men, no longer extending the working age).

“They said that the responsibility for the social insurance fund belongs to the Social Insurance, not us. Once we have paid, we must enjoy the holiday and cannot extend it and force us to work overtime. They even said very harsh words like forcing us to work overtime to get a certain percentage…” - Mr. Vu Quang Tho added.

Therefore, according to the representative of the Vietnam General Confederation of Labor, to ensure fund safety, with this contribution we will have techniques to adjust but not necessarily prolong the working age.

According to VOV