Half of Vietnam's workforce opts for early retirement, threatening pension fund

By Bui Hong Nhung   October 29, 2016 | 10:04 am GMT+7
Half of Vietnam's workforce opts for early retirement, threatening pension fund
Women wearing traditional hats, known as a non la, sit in a market in Hoi An, Vietnam. Photo by REUTER/SJorge Silva

The lack of balance could push the country’s social insurance fund to the verge of bankruptcy

A stampede toward early retirement has thrown Vietnam's social insurance fund off balance.

Though Vietnam has a relatively low retirement age, many employees here continue to opt for an early out, the Social Insurance Department said at a meeting on October 26.

Vietnam's official retirement age for men is 60 and women 55.

In 2012, however, Vietnamese men retired at an average age of about 54 while women retired around 53.

Only about 40.5 percent of employees retired at the legal age while around 50 percent took early retirement, the department said. The Labor Law allows those holding key positions to stay longer with their organizations if they can meet health requirements.

Many critics of the system say it lacks sufficient incentives to stick it out.

Retirees currently receive up to 75 percent of their monthly salary. Each year that he or she retires early only reduces that payout by 2 percent. Before 2014, that deduction was just 1 percent.

“According to recommendations from the International Labor Organization (ILO), the figure must be 5-6 percent to prevent workers from retiring early,” the department told the Vietnam News Agency.

The problem gets more pronounced as Vietnam’s life expectancy continues to rise.

Tran Huy Lieu, deputy head of the Social Insurance Department, said the average retiree lived to about 67 in 1995. Now they live to about 73, so many continue to draw pensions for approximately 20 years.

Lieu added that in 1996, for every 217 workers paying into the fund, one was drawing funds out. Last year, that ratio plummeted to 8.13:1.

“Sooner or later, the social insurance fund will fly off balance.”

A recent draft of the Social Insurance Law proposed raising the retirement ages to 60 for women and 62 for men to prevent the fund from collapsing.

“It’s such a vital issue, affecting all aspects of the social life so the government needs to create a rational roadmap,” Lieu said.

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