The National Assembly's Social Affairs Committee deputy chairman Bui Si Loi spoke with the Thoi bao Ngan hang (Banking Times) about the Government's guarantee for the social insurance fund.
Do you think there is a risk that the social insurance fund will break down?
The social insurance fund is a long-term policy. At the moment, there is inequality between social insurance fees and pay levels. This means that people receive a lot of benefits while social insurance fees are very low.
During the implementation process, it is true that the fund can break down, even in developed countries. In Viet Nam, policies will be adjusted in order to minimise this risk. The Social Insurance Law will be revised in efforts to prevent future breakdowns. Despite many difficulties, the Government will guarantee the Social Insurance Fund's continued existence and development.
What measures are being taken to address the problem?
There are many ways to handle the problem. First, the fee (premium) levels should be adjusted. The Labour Code regulates that social insurance premiums are based on pay and allowances on labour or working contracts. For a long time, we paid premiums based on the minimum wage.
Second, we should increase the retirement age gradually. Currently labour supply is higher than demand, so the retirement age should be kept at 55 for women and 60 for men.
For the long term, we should have a plan for increasing the retirement age step by step in order to prepare for the trend of population ageing. The Government is drafting a bill on the revised Social Insurance Law to submit to the NA.
According to the draft, the retirement age will be increased by one year every two or three years, reaching 60 for both men and women when the country's population enters the ageing period. A long-term plan is needed for the country to prepare skilled human resources and for people's awareness to change.
Third, insurance participation should be expanded. At the moment, five people are paying insurance premiums for each beneficiary compared to nine or 10 people in 2011. In many countries, insurance funds are balanced between incoming and outgoing and we must strive for such a target.
In addition, the fund should be managed effectively in order to overcome the impact of price escalation and currency devaluation. So funds should be invested in major projects that result in profits higher than the interest rate announced by the State Bank. The revised Social Insurance Law will address these problems.
Is there any risk from investing these funds?
Risks would come from bad investment and management. We used to invest in banks with more than 50 per cent of capital from the Government, but we did not see higher profits and growth. Funds were usually stable from Government owned banks with low profits. But for the long term, we should invest in key infrastructure and transport projects that would ensure the fund's stability.
Recently we experimentally invested VND1,600 billion (US$76 million) in the Lai Chau Hydro-Power Plant, a safe investment with high interest. In 2012, we gained profits higher than the State Bank's interest and escalation of prices index.
This means that labourers and retired people should feel secure about the fund, right?
Viet Nam currently has 2.6 million people paid by the social insurance fund, of which 1.9 million are retired. However, most of them retired before January 1, 1995, and were paid by the State Budget. The number of people who retired after beginning of 1995 was very modest.
We should increase the retirement pension for those living below the minimum living demand to a level equal to the minimum wage. People with high incomes paying high premiums would receive high retirement pensions.
Moreover, supplementary forms of retirement insurance should be expanded, so enterprises with high income would buy others' insurance out of State insurance. Labourers who worked overseas and bought social insurance could rejoin the social insurance fund when they returned to the country to get a bigger retirement pension. — VNS