29-6-2023 (HANOI) Experts argue that in order to improve pensions, the state should concentrate on compensating for inflation and the cost of living for low-income pensioners, rather than providing a fixed increase for everyone.
Starting from July 1st, the pension of Mr. Tran Minh Chau, a 65-year-old resident of Tan Phu District in Ho Chi Minh City, increased by 262,500 Vietnamese Dong due to a 12.5% adjustment made by the state. Mr. Chau, a former frozen seafood processing worker, retired in 2013 after reaching the labor age limit. With 20 years of social insurance contributions, he receives 55% of his average income as his pension, amounting to over 2.3 million Vietnamese Dong. After the adjustment, he now receives nearly 1.3 million Vietnamese Dong per month.
Sharing the same view, Mr. Bui Sy Loi, former deputy chairman of the Social Affairs Committee of the National Assembly, believes that low pensions mainly affect direct laborers in the production sector and workers in non-state-owned areas. Pension amounts are calculated based on the entire social insurance contribution period. These pensioners have minimal accumulated savings, except for retirement benefits. On the other hand, pension amounts for business leaders or individuals with state elements are typically higher on average during the last five years.
“The disparity between these groups can be dozens to nearly a hundred times. Is it necessary for pensions to have such a wide gap?” Mr. Loi raised the question and suggested reducing the difference to around 15-20%.
Mr. Cao Van Sang, former director of the Social Insurance Agency in Ho Chi Minh City, mentioned that a proposal focusing on adjusting pensions for low-income groups was previously made but faced opposition. However, there is currently no plan on how to address the issue of those receiving extremely low pensions.
Having been involved in the insurance industry since its early expansion outside of state-owned entities, Mr. Sang believes that Vietnam implemented a comprehensive social insurance policy relatively early. Over 30 years ago, when the country was still poor and the economy was underdeveloped, with low labor incomes and a minimum wage of only 120,000 Vietnamese Dong, the social insurance contribution was established. After several adjustments, the minimum pension has increased to 1.8 million Vietnamese Dong, representing a 1,500% rise.
“Despite the high percentage increase, the received amount is not substantial,” said Mr. Sang. In reality, the low contribution and low pension rates for some individuals are partly due to the consequence of early implementation of comprehensive social insurance without the matching organizational and economic development. Now that their pensions are too low, the state needs to compensate in order to ensure a minimum standard of living.
Assoc. Prof. Dr. Nguyen Duc Loc, Director of the Institute of Social Life Studies, believes that when adjusting pensions, there should be consistent rates across the board. However, the group receiving lower amounts than the minimum living conditions should be compensated according to the principle of social welfare within the survival threshold. “This approach would gain more consensus from the beneficiary groups,” said Dr. Loc.
Prof. Dr. Giang Thanh Long suggests implementing regulations that allow individuals to make choices. For example, in Thailand, a nationwide retirement system has been implemented, providing a monthly allowance of 800 baht (equivalent to 540,000 Vietnamese Dong) for all individuals aged 60 and above. However, the government allows citizens to decline if they feel it is unnecessary. They can access the system and receive support when needed.
