Directive 18/CT-TTg guiding the pension policy of the Prime Minister of the Government of Vietnam through two phases 2021-2025 and 2026-2030
Directive 18/CT-TTg guiding the pension policy of the Prime Minister of the Government of Vietnam through two periods: 2021-2025 and 2026-2030
According to Resolution 104/2023/QH15, a comprehensive wage policy reform will be implemented according to Resolution 27-NQ/TW in 2018 from July 1, 2024. Adjustments will be made to pensions, social insurance benefits, monthly allowances, and preferential allowances for people with meritorious services, along with some social welfare policies linked to the statutory pay rate.
Recently, the Prime Minister of the Government of Vietnam issued Directive 18/CT-TTg in 2024 on the development of a five-year financial plan for the period 2026-2030.
In it, the pension policy is assessed and determined to develop a five-year financial plan through two phases:
- Assessing the implementation of the five-year financial plan for the period 2021 - 2025.- Developing the national five-year financial plan for the period 2026 - 2030.
To be specific:
- Assessing the implementation of the national five-year financial plan for the period 2021 - 2025 in relation to the implementation of wage policy reform, pensions, allowances for people with meritorious services, and other social welfare policies.- Developing the national five-year financial plan for the period 2026 - 2030 to determine the balanced framework of the state budget, including the comprehensive implementation of wage policy reform and other pension policies, social insurance, and preferential allowances for people with meritorious services, and social allowances.
Thus, Directive 18/CT-TTg in 2024 of the Prime Minister of the Government of Vietnam on the development of the five-year financial plan for the period 2026 - 2030 states that the pension policy for the period 2021 to 2025 is evaluated to serve as a basis for developing the five-year financial plan for the period 2026 to 2030.
Directive 18/CT-TTg guiding the pension policy of the Prime Minister of the Government of Vietnam through two periods: 2021-2025 and 2026-2030
How to calculate the pension from July 1, 2024, when the statutory pay rate is abolished?
According to Resolution 27-NQ/TW in 2018, the wage reform mentions the statutory pay rate as follows:
Content of reform
3.1. For officials and public employees and the armed forces (public sector)
...
c) Determine specific factors to design new salary scales
- Abolish the current statutory pay rate and salary coefficients, and establish a basic salary as a specific amount in the new salary scale.
Based on the above regulations, it can be seen that the wage policy reform will abolish the statutory pay rate from July 1, 2024.
How will the method of calculating the pension be affected?
According to current regulations in Article 7 of Decree 115/2015/ND-CP, for those participating in compulsory social insurance, the pension in 2024 is calculated based on the monthly pension benefit rate and the average monthly salary paid to social insurance.
To be specific, the pension calculation is expressed in the following formula:
| Monthly pension | = | Monthly pension benefit rate (%) | X | Average monthly salary paid to social insurance || --- | --- | --- | --- | --- |
Thus, under this formula, the statutory pay rate is not a direct adjustment factor in the monthly pension calculation. Hence, when the statutory pay rate is abolished from July 1, 2024, the above pension calculation is expected to remain unchanged until new regulations are issued.
For individuals who receive an increase in pension from July 1, 2024, the formula for calculating the adjusted monthly pension may be as follows:
| Adjusted monthly pension | = | Pre-adjustment pension | + | (Adjustment rate x Pre-adjustment pension). || --- | --- | --- | --- | --- |
However, the minimum pension according to the Social Insurance Law 2014 is equivalent to the statutory pay rate. Therefore, when the statutory pay rate is abolished, new guidance will be needed regarding this minimum pension regulation.
How long must one pay compulsory social insurance to be eligible for pension?
Article 54 of the Social Insurance Law 2014 amended by clause 1, point a of Article 219 of Labor Code 2019 stipulates the conditions for pension eligibility for participants in compulsory social insurance as follows:
Pension eligibility conditions
1. Employees specified in points a, b, c, d, g, h, and i, clause 1, Article 2 of this Law, except as stipulated in clause 3 of this Article, will be eligible for a pension if they have 20 years or more of social insurance contributions and fall into one of the following categories:
a) Reach the age as prescribed in clause 2, Article 169 of the Labor Code;
b) Reach the age as prescribed in clause 3, Article 169 of the Labor Code and have at least 15 years in heavy, hazardous, dangerous work, or extremely heavy, hazardous, dangerous work from a list issued by the Ministry of Labor - Invalids and Social Affairs or have at least 15 years working in areas with particularly difficult socio-economic conditions, including time in areas with a regional allowance of coefficient 0.7 or higher before January 1, 2021;
c) Employees who are up to 10 years younger than the retirement age specified in clause 2, Article 169 of the Labor Code and have at least 15 years in coal mining occupations in underground mines;
d) Employees infected with HIV due to occupational accidents while performing assigned tasks.
2. Employees specified in points d and e, clause 1, Article 2 of this Law who retire with 20 years or more of social insurance contributions will be eligible for a pension if they fall into one of the following categories:
a) Up to 5 years younger than the retirement age as stipulated in clause 2, Article 169 of the Labor Code, except where the Law on Vietnam People's Army Officers, the Law on People's Public Security, the Law on Cryptography, the Law on Professional Soldiers, national defense employees, and public employees stipulate otherwise;
b) Up to 5 years younger than the retirement age as stipulated in clause 3, Article 169 of the Labor Code and have at least 15 years in heavy, hazardous, dangerous work, or extremely heavy, hazardous, dangerous work from a list issued by the Ministry of Labor - Invalids and Social Affairs or have at least 15 years working in areas with particularly difficult socio-economic conditions, including time in areas with a regional allowance of coefficient 0.7 or higher before January 1, 2021;
c) Employees infected with HIV due to occupational accidents while performing assigned tasks.
3. Female workers who are officials at the commune level or non-specialized staff at the commune, ward, or commune-level town and participate in social insurance when they retire with 15 to under 20 years of social insurance contributions and reach the retirement age as stipulated in clause 2, Article 169 of the Labor Code will be eligible for a pension.
4. Special retirement age conditions for certain cases as prescribed by the Government.
Thus, to be eligible for a pension, employees need to meet both the retirement age conditions and the number of years of social insurance contributions.
In particular, the number of years of social insurance contributions should be at least 20 years for both men and women or from 15 to under 20 years for female communal-level officials or non-specialized staff at communes, wards, or commune-level towns.
LawNet