Wednesday, December 13 2017

VietNamNews

Ministry submits plan for supplementary pension fund

Update: October, 18/2013 - 09:37

At present, retired people in Viet Nam receive their pensions, up to a maximum of 75 per cent of their salary, from part of the Viet Nam Social Security Fund (VSS).— File Photo

HA NOI (VNS) — The Ministry of Labour, Invalids and Social Affairs will submit to the Prime Minister a pilot programme for the implementation of a voluntary supplementary pension fund this year, which is expected to help increase pensions for retirees.

At present, retired people in Viet Nam receive their pensions, up to a maximum of 75 per cent of their salary, from part of the Viet Nam Social Security Fund (VSS).

The fund is currently based on an average of about US$152 per month, but many retirees receive monthly pensions of about $50.

The pension was created based on minimum wage, thus a burden is created for the VSS each time minimum wage increases.

Moreover, the International Labour Organisation warns that the VSS, currently covering about 20 per cent of the labour force, could begin showing a deficit by 2021 and run out of money by 2034, if no reform is made.

Deputy minister Nguyen Minh Huan said that besides current compulsory contributions to the pension fund, employers and employees could contribute to a supplementary pension scheme in which they negotiate for contribution proportion.

The contribution could be 5-22 per cent of the employee's monthly salary but not to exceed VND5.06 million per person per month or VND60.72 million per person per year.

The assets and rights generated from the employees' contributions would be managed through individual accounts under the overseeing functional agencies for savings and investment.

Huan said that the Government would develop proper legal framework for the implementation of a three-year-long pilot programme while offering incentives for participating employers and employees such as exemptions from personal and corporate income tax for the contributions made to the supplementary pension fund.

Vice head of the ministry's Social Insurance Department Pham Truong Giang said that now was the right time for Viet Nam to implement a supplementary pension scheme, as the country is entering a golden population period where the number of working people exceeds the number of dependant people, but once the period ends, the aging population would put increasing pressure on the fund.

"The supplementary pension could help reduce the pressure for the State budget," he said.

A survey by the ministry revealed that 70 per cent of 700 enterprises in Ha Noi and HCM City said they welcomed the policy on a supplementary scheme, he said, adding that so far, over 20 enterprises including State-owned companies, multi-nationals and private ones wanted to join.

Giang said that the supplementary pension scheme could be seen as a tool for employers to attract competent employees, as employees could be more reassured about their pension.

Under the pilot programme, at least 70 per cent of the supplementary pension would be spent to buy Governmental bonds, a safe investment channel, so if fund management companies failed to use the fund effectively or accrue losses, employees would still receive profit from the Government bonds.

Director General of VietFund Management Company Tran Thanh Tan said that big domestic and international groups have wanted such supplementary pension scheme for long time, but could not implement it due to the lack of legal framework.

If the supplementary pension is used to buy Governmental bonds, it could help increase liquidity in the bond market and money supply to public investment, thus boosting production and generating more jobs, Tan said.

If approved, the pilot programme for a supplementary pension would begin next year. — VNS

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