Proposal to keep minimum pension but narrow beneficiaries

The Social Insurance Law stipulates that the lowest monthly pension (minimum pension) of employees who pay compulsory social insurance is equal to the basic salary, currently 1.8 million VND. If the recipient receives less than this amount, the budget or the Social Insurance Fund will compensate. However, from July 1, when the salary reform takes effect, the basic salary will no longer exist.

In the latest draft of the Social Insurance Law, the Government proposed to add a provision on transitioning to a minimum pension to preserve the provisions in the current law, but only applies to those who pay compulsory social insurance before the effective date of the bill (July 1, 2025) and have participated for 20 years or more. The reference level in the revised bill is applied at the base salary if it has not been abolished (currently 1.8 million VND); until the base salary is abolished, the reference level will not be lower.

Compared to the draft at the end of May, the Government has retained the minimum pension level but does not apply it to social insurance participants after July 1, 2025. The removal of this pension level has made National Assembly deputies and experts worry that social security will "fall off a cliff", and many elderly people will not have enough to live on. Currently, social security coverage for the elderly after working age is less than 40%, while the population is forecast to be 29 million elderly people over 60 years old by 2049.

According to the revised bill, the lowest level in the social security system is the social pension subsidy level, proposed at VND500,000 per person per month. This level only reaches 25-33% of the current urban and rural poverty line.

In the latest draft, the Government also added a regulation that employees who voluntarily paid social insurance before January 1, 2021, for 20 years or more, will receive a pension when they reach the age of 60 for men and 55 for women. Employees can retire 2-5 years earlier than those who participated after January 1, 2021, and employees who pay compulsory social insurance will not be deducted 2% when retiring before the age.

The policy applies to workers who join the voluntary sector system before the retirement age is increased according to the roadmap. The Labor Code stipulates that from 2021, the retirement age will increase by three months each year for men until reaching 62 years old in 2028 and by four months for women until reaching 60 years old in 2035.

This proposal does not apply to workers who pay compulsory social insurance. Thus, participants in both the compulsory and voluntary sectors from January 1, 2021 onwards who want to receive a pension will still pay for the full 20 years as currently, which will be reduced to 15 years in the near future, and reach the retirement age according to the roadmap, 60-62 years old. If they retire early before the age, workers will have their benefit rate deducted by 2% each year.

The International Labor Organization predicts that without support from the state budget, by 2030 Vietnam will have over 16 million elderly people without pensions due to the aging rate being faster than the economic growth rate. The income of the elderly in Vietnam mostly comes from the support of their children, who continue to work.

The revised Law on Social Insurance is expected to be passed by the National Assembly on June 25 and take effect from July 1, 2025.