Retirees can't retire, pensions don't cover basic needs

Nguyen Thi Lan and her husband Tran Minh Chau are both 65. They live in Ho Chi Minh City's Tan Phu District.

In 2012, Lan retired after 26 years of paying social insurance. The next year, Chau retired after 20 years of paying social insurance.

Nguyen Thi Lan and her husband Tran Minh Chau at their house in Ho Chi Minh City's Tan Phu District, June 2022. Photo by VnExpress/An Phuong

As per existing law, contracted laborers must pay social insurance for 20 years to get a pension when they retire.

Before 2021, the retirement age was regulated at 55 for women and 60 for men. Starting last year, Vietnam has gradually increased the retirement age until it reaches 60 years for women by 2035 and 62 for men by 2028.

With Lan fulfilling all required conditions, she is eligible for the highest retirement pension level, which is 75 percent of the monthly salary that had been used to calculate her social insurance premiums when she was working.

Today, she gets a pension of VND1.8 million ($77.2) each month.

Lan said back when she was still a worker at the Hung Hau Agricultural JSC, it "was not easy" for her and other workers to know the salary level on which the social insurance premium was based.

"When receiving the decision on my retirement pension, I was shocked at how low it was," Lan said.

Her husband’s pension is even lower. Though Chau had worked for 20 years, he retired at 56, four years sooner than regulated. Because of that, he was offered a pension level of just 55 percent of his salary base – or VND1.3 million per month.

Through several adjustments in which the government decided to raise the retirement pension, Lan now receives VND2.8 million and the pension for Chau is VND2.1 million.

In Vietnam, those living in urban areas and earning less than VND2 million per month are considered poor. HCMC's poverty line is VND3.8 million ($164).

However, the couple cannot get access any aid policy for the poor because they are classified as retirees with monthly pensions.

Ever since they retired, Chau has worked as a guard at stores while Lan has found a seasonal job at the Hung Hau Agricultural JSC. During the latest Covid-19 outbreak in HCMC last year, both lost their jobs and have stayed unemployed until now.

"All our bills, from utility to healthcare, and our daily spending are now dependent on the total pension of VND4.9 million," said Lan.

Nguyen Van Phai, 56, retired in 2017 from his position as a sanitation worker for District 6 Public Service Co. Ltd after an accident that left him with a broken leg. He has a retirement pension of VND3.4 million per month after 21 years of paying social insurance.

With his wife working as a scrap vendor and son still a student, Phai and his wife struggle to make ends meet. These days, he works as a motorbike taxi driver.

Nguyen Van Phai works as a motorbike taxi driver in Ho Chi Minh City, June 2022. Photo by VnExpress/An Phuong

Dodging the law

Phai, Lan and Chau are among more than 45,000 people in HCMC who get monthly pensions of under the city's poverty line, according to data from HCMC Social Security.

Its director Phan Van Men said the city has more than 222,000 people receiving retirement pensions, at a monthly average of nearly VND6 million.

He said there are some cases in which the retiree receives more than VND124 million per month, but also those who get less than VND1 million per month.

Whether the pension is high or low depends on the duration that employees paid the social insurance and the salary levels used as the basis for paying social insurance premiums.

In most cases, those that receive low retirement pensions are factory workers.

Men said many companies "dodged the law" to reduce the sum paid because it requires employees to pay one-third and employers pay two-thirds of the premiums.

Employees either agreed with or did not care how their employers split their remuneration into basic income and perks, making a low sum the basis for social insurance premiums, he added.

Mai Duc Chinh, former deputy chairman of Vietnam Labor Confederation, said poor pension is the result of using minium wage as the salary base for calculating social insurance contributions.

Chinh said employers should be required to pay the contributions based on the employees' actual income.

Nguyen Ngoc Quynh, a social security expert at the United Nations Population Fund, said that currently, retirees receiving pensions that are too low cannot access any social support scheme and this needed to be fixed. The state needs to expand the group receiving monthly social benefits to those who are receiving pensions below the poverty level, which is VND2 million per month for urban areas and VND1.5 million per month for rural areas, she said.

In some countries such as Finland and Sweden, pensions are also granted to retirees from the social insurance fund following the principle of their having contributed to the fund.

However, those who receive pensions below the minimum living standard will be offered an additional sum from the social pension fund from the state budget, Quynh said.

She said that in order to implement this policy, the pension system and the social insurance fund need to complete each other and stay interconnected.

Vietnam should also build a synchronous social security database to ensure the accurate provision of benefits for low-income people, she said.