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Should the retirement age be raised?

Update: May, 26/2014 - 08:58
As part of the revised draft Law on Social Insurance, Viet Nam is considering gradually raising the retirement age to 62 years for men and 60 for women starting in 2016. Currently, the retirement age for men is 60 and 55 for women.

The proposal also aims to reduce the financial pressure on the Viet Nam Social Security Fund, which the International Labour Organisation has warned could start running a deficit by 2021 and run out of money by 2034 if no reforms are made.

This week, the National Assembly plans to discuss the revised draft Law on Social Insurance at one of its general sessions.

Viet Nam News examines the issue with two experts.

Raising the retirement age as part of the revised draft Law on Social Insurance is seen as the main means of easing pressure on our social insurance fund. What are your thoughts on this?

Tran Thi Thuy Nga

Tran Thi Thuy Nga, Director General of Social Insurance Department, Ministry of Labour, Invalids and Social Affairs

I want to reaffirm that the revised retirement policy in the revised draft Law on Social Insurance is also intended to ensure fairness for all beneficiaries, so that the fund can be sustainable in the long term and reduce the unfairness in terms of retirement policies for men and women.

When the surplus of the fund does not increase at the same rate as the rate of people getting old, the state budget will bear the burden.

The proposal to raise retirement age is just one of the solutions to balance the fund and ensure social security in the long term.

Bui Sy Loi, vice chairperson of the National Assembly Committee on Social Affairs

Revising the Law on Social Insurance after seven years of implementation is very necessary. We have to expand the beneficiaries to ensure long-term social security according to the spirit of Resolution 21 of the Party Politburo.

This revised law would also ensure that those who contribute more to the fund will benefit more and that we can ensure the sustainability of the fund. In addition, we want to increase the jurisdiction of social insurance agencies and the role of the State Council on Social Insurance Management, ensuring that the fund can grow and be maintained efficiently.

Increasing retirement age has been put forward as a solution considering that in many countries, the retirement age is capped at over 60 or 65, but we also have to take into account our socio-economic development and the health and living conditions of workers before making any change.

The suggestion that we should raise retirement age is based on the argument that it will expand the time that workers pay social insurance and therefore there will be more funds for pensions. However, at this time, whether we should raise the retirement age is a matter of serious consideration.

Many people worry that raising the retirement age would mean less job opportunities for young people. How can we take this into consideration?

Nga: The adjustment would begin with state employees in 2016, with the retirement age increasing by four months each year until it hit 62 for men and 60 for women. For other workers, this change would start in 2020. For those working in fields with a high level of toxicity and danger, the retirement age would not be changed.

Keep in mind that according to our calculation, female employees in government agencies will not retire at age 60 until 2031. This time frame will minimise the effect on the labour market as well as the quality of labour and job opportunities for young workers. It will give workers and employers enough time to adjust.

In 1960, the average life expectancy of Vietnamese was 40, but in 2010, it reached 73. We should also note that the retirement age in Viet Nam has not been changed for more than 50 years, since we first drew out provisional regulations on social insurance in 1961.

Bui Sy Loi

Loi: Raising the retirement age is something we have to do in the long term but I do not think it should be increased now. The National Assembly has to take into account many factors before deciding.

First of all, we have recently become a middle-income country, with average annual income of around US$1,500. The health conditions of our workers are not at the same level of other developed countries, even though our life expectancy is around 74.

We are in the "golden population" period, which puts pressure on labour demand. The economy does not generate enough new jobs, even though at least 1 million workers enter the market every year. In the fourth quarter of 2013, there were about 1.2 million unemployed workers, 72,000 of whom had some type of degrees.

The question is: do we need to increase the retirement age while so much of the workforce is still unemployed? We cannot let young workers who are trained and in good health be stuck without jobs.

In addition, the 2012 Labour Code, which takes effect July 1, 2013, stipulates that the retirement age is 55 for females and 60 for males. It also stipulates that those with a high level of technical ability can extend their working time for up to five years. That means we can still take advantage of skilled workers.

At the same time, those who work in island and border areas or in a toxic environment can retire earlier.

I agree that raising the retirement age is necessary in the long term to ensure that we are not short of workers as the population ages. However, for now, we have to be really careful.

What about the situation in other countries? How can we deal with the insurance fund shortage?

Nga: In the process of drafting the revised Law on Social Insurance, the situation in many other countries has been taken into account.

Most countries that have raised the retirement age are developed. This is a very sensitive issue and affects all aspects of society. Therefore it must be done very carefully and take into account all social factors. The Government and the workforce must be mentally prepared.

For example, when France increased the retirement age from 65 to 67, there were protests because the move was not accompanied by a clear plan.

Many companies owe workers social insurance money, so we have to ensure the implementation of our legal framework on social insurance and improve state management. Localities must report their debt situations to People's Committees and the departments of Labour, Invalids and Social Affairs to ensure inspections and punishments for violators.

The revised Law on Social Insurance may increase the fine for violations and increase interest rates for those who pay social insurance late.

Loi: Currently, our social insurance is calculated at the rate of 22 per cent of the workers' minimum wage, not the actual salary. This is one of the factors causing the fund imbalance.

The debt owed by companies is estimated at trillions of dong. Can this be lowered? We have to work on our policies to address that.

Duong Kim Phuong, deputy principal of Nguyen Trai Primary School in Ha Noi's Thanh Xuan District

I'm going to retire in October this year and I really look forward to it, as at present I'm not healthy enough to take charge of work every day. At my age, it is better to relax, travel or join clubs for the elderly.

I do not want to lengthen my working period as thousands of young students graduate each year and many of them cannot find a job. Old people should retire to create more opportunities for young people who are more self-motivated, creative and agile. They will be a wonderful workforce.

The longer working period should be applied for professors and lecturers because they need more time to research. The more time they work, the more experience and knowledge they will be able to pass on to young people. — VNS

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