The Vietnamese Pension System and Aging Population

Abstract

AbstractVietnam is considered one of the countries with the fastest aging rates in the world, reducing the available time to prepare for the aging population recently. The increasing number of older people in Vietnam sets a dependency burden, posing many challenges for the social security and pension system. The pension system in Vietnam includes two types: compulsory pension and voluntary pension. In the compulsory pension system, public pension funds are managed by the government and sponsored by payroll taxes on employers and employees. However, only 23.5–30% of the elderly had pensions and welfare from the state budget and social insurance fund. The development of voluntary pension funds in Vietnam has been in effect since 2013, and voluntary pension programs are currently implemented under the government’s regulations through voluntary pension insurance products (annuities) provided by life insurance companies, investment funds or other financial institutions. To date, Vietnam's population has approximately 10% participating in life insurance, in which pension insurance packages account for a small proportion. The pension system in Vietnam shows some weaknesses that need to be improved to address the aging population in the near future. First, women are more likely to lack adequate older age protection. Second, a large proportion of informal employees do not have access to public social insurance benefits. Third, voluntary pension programs have not been shown to be effective and developed. Fourth, the small contributed public pension fund is inadequate with the growing number of beneficiaries. Finally, the current tax-funded pension schemes have provided only a small number of elderly individuals with low benefits insufficient to ensure a decent living in old age. The government needs to launch solutions to support women employees, to encourage employees working in informal economic sectors to participate in social insurance and unemployment insurance, to change the current tax-funded schemes to increase the amount of public insurance funds and at the same time to support voluntary pension market development to share the burden of the public fund.KeywordsPensionAging populationVietnamRetirementInsurance companyVoluntary pension