Vietnam pension system world's 57th best: report

With an average score of 4.37 out of seven, Vietnam’s pension system is weaker than in Indonesia (28), Singapore (30), the Philippines (37), and Thailand (52), according to Global Pension Report 2020 released by multinational financial services company Allianz.

In Southeast Asia, Vietnam only did better than Malaysia (61) and Laos (63), stated the report, which analyzed pension systems in 70 countries and territories in terms of sustainability and adequacy.

The ranking is based on three sub-indexes including the financial and demographic starting point that reflects the baseline of specific countries in terms of demographics and public finances, sustainability that measures how pension systems react to demographic change, and adequacy that measures how pension systems provide an adequate standard of living in old age.

Allianz said the main issue of Vietnam’s pension system is insufficient adequacy where among the 70 economies analyzed it ranked 60 in the sub-index and 32nd in terms of sustainability.

According to the report, Vietnam’s population in retirement age is set to triple from 11.4 percent now to 32.7 percent in 2050.

"Although these rates are going to be rather moderate in absolute terms, they imply a breakup of traditional family structures in the country where the elderly still depend the most on their children to take care of them in old age," the report affirmed.

Vietnam’s current population is around 96.2 million, putting the percentage of elderly people at around 11.7 percent, according to statistics from the Ministry of Labor, Invalids and Social Affairs.

As the population ages, Vietnam’s social insurance fund could be in trouble by 2020 and go bust by 2037 if the current retirement age remains unchanged, Vietnam Social Security has warned.

Sweden has the relatively best pension system in the world, followed by Belgium and Denmark.

World Bank forecasts Vietnam's pension fund to run out by 2030 due to its aging population. The bank said in a 2018 report Vietnam should raise pension payments in accordance with inflation, but ensure the increased sum is lower than the minimum wage.

The country should also raise its retirement age for both male and female workers to the same level step by step, World Bank added.

The number of Vietnamese over 65 will rise from 6.3 million now to 18 million by 2040, accounting for over 18 percent of the population and transforming Vietnam from a young society into an old one, a labor ministry report quoted the United Nations as saying.

Vietnam plans to increase the retirement age to 60 years for women and 62 for men under Labor Code changes approved by parliament in November last year.