Monday, July 16 2018


Voluntary pension plans eyed

Update: April, 25/2013 - 10:00

HA NOI (VNS)— Voluntary pensions were becoming necessary in Viet Nam to ensure social security as the country's population aged, participants said at a conference yesterday in Ha Noi.

The Ministry of Finance held the conference so that relevant authorities could learn about other countries' experiences with voluntary pensions, such as the UK, Japan and China.

At the conference, the ministry also introduced a draft circular on the voluntary pension fund and asked for public feedback.

Viet Nam has a population of more than 87 million, including more than 50 million of working age. While the country is currently entering what's termed a "golden population structure", this will inevitably shift into an ageing period.

This will increase the need for voluntary pensions in addition to mandatory public pensions, especially as the living standard and longevity of Vietnamese people improve, according to the Insurance Supervisory Authority.

There are two kinds of pension schemes currently used in the world: policy-based and trust-based. The policy-based scheme, in which insurance enterprises design and provide insurance products to consumers, was more appropriate for Viet Nam because it would be less complicated and less risky, the department said.

An expert from Prudential said that the high employment rate in Viet Nam (about 82 per cent) together with the country's increasing productivity ensured that people would be able to prepare and invest for retirement.

However, he added that coordination among the Government, employers and insurance companies was critical for the development of pension funds. Insurance enterprises should also diversify products and services to meet customers' needs.

According to Desmond Chan, director of the Pension Strategy – Group Corporate Solutions of AIA Group, experience from overseas markets showed that appropriate tax incentives had to be provided to both employers and members to encourage them to enroll for long periods.

The pension assets should also be put under tight management, he said, to prevent them from being used for inappropriate purposes –which could trigger the collapse of the fund.

Experts at the conference urged that voluntary pensions be implemented as soon as possible: "The earlier you start, the better it is for everyone."

Under the draft circular, only insurance enterprises with equity of more than VND1 trillion (US$47.62 million) would be allowed to implement this type of insurance and must contribute more than VND200 billion ($9.5 million) to the pension fund without withdrawal to ensure their responsibility, the department said.

The pension fund would be separated from other investment funds belonging to insurance enterprises to ensure its efficiency.

The funds would be invested in deposits at credit institutions, Government bonds and enterprises' bonds. The money could not be invested in real estate, gold or securities of stock and financial companies.

Workers' contributions to the voluntary pension fund would be exempt from personal income tax (PIT). The insurance fee exempted from PIT was expected to be VND1 million (US$49.50) per month.

In addition, the contributions of employers would also be reflected in their income taxes, according to the draft circular. — VNS

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