What are the guidelines regarding the pension policy from the Prime Minister of Vietnam through two periods of 2021-2025 and 2026-2030 under Directive 18/CT-TTg?
What are the guidelines regarding the pension policy from the Prime Minister of Vietnam through two periods of 2021-2025 and 2026-2030 under Directive 18/CT-TTg?
According to Resolution 104/2023/QH15, a comprehensive salary policy reform will follow 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 Vietnam issued Directive 18/CT-TTg in 2024 on the development of a five-year financial plan for the 2026-2030 period.
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 2021 - 2025 period.
- Developing the national five-year financial plan for the 2026-2030 period.
To be specific:
- Assessing the implementation of the national five-year financial plan for the 2021 - 2025 period in relation to the implementation of salary policy reform, pensions, allowances for people with meritorious services, and other social welfare policies.
- Developing the national five-year financial plan for the 2026-2030 period to determine the balanced framework of the state budget, including the comprehensive implementation of salary 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 Vietnam on the development of the five-year financial plan for the 2026-2030 period states that the pension policy for the 2021-2025 period is evaluated to serve as a basis for developing the five-year financial plan for the period 2026 to 2030.
What are the guidelines regarding the pension policy from the Prime Minister of Vietnam through two periods of 2021-2025 and 2026-2030 under Directive 18/CT-TTg?
From July 1, 2024, how to calculate the pension when the statutory pay rate in Vietnam is abolished?
According to Resolution 27-NQ/TW in 2018, the salary 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 payrolls
- Abolish the current statutory pay rate and salary coefficients, and set a base pay as a specific amount in the new payroll.
Under the above regulations, the salary policy reform will abolish the statutory pay rate from July 1, 2024.
How will the formula for 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 rate and the average monthly salary serving as the basis for social insurance premium payment.
The pension calculation is expressed in the following formula:
Monthly pension = Monthly pension rate (%) X average monthly salary serving as the basis for social insurance premium payment
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.
What is the compulsory social insurance premium payment period eligible for pension in Vietnam?
Article 54 of the Social Insurance Law 2014 amended by point a, clause 1 of Article 219 of Labor Code 2019 stipulates the conditions for pension eligibility for participants in compulsory social insurance as follows:
Article 54. Conditions for receiving retirement pension
1. An employee mentioned in Points a, b, c, d, g, h and i Clause 1 Article 2 of this Law, except for the cases specified in Clause 3 of this, will receive retirement pension if he/she has paid social insurance for at least 20 years and:
a) He/she has reached the retirement age specified in Clause 2 Article 169 of the Labor Code;
b) He/she has reached the retirement age specified in Clause 3 Article 169 of the Labor Code and has at least 15 years’ doing the laborious, toxic or dangerous works or highly laborious, toxic or dangerous works on the lists of the Ministry of Labor, War Invalids and Social Affairs; or has at least 15 years’ working in highly disadvantaged areas, including the period he/she works in areas with the region factor of at least 0,7 before January 01, 2021;
c) His/her age is younger than the retirement age specified in Clause 2 Article 169 of the Labor Code by up to 10 years and he/she has worked in coal mines for at least 15 years; or
d) He/she contracted HIV due to an occupation accident during performance of his/her assigned duty.
2. An employee mentioned in Points dd and e Clause 1 Article 2 of this Law will receive retirement pension if he/she has paid social insurance for at least 20 years and:
a) His/her age is younger than the retirement age specified in Clause 2 Article 169 of the Labor Code by up to 05 years, unless otherwise prescribed by the Law on Military Officer of Vietnam’s Army, the Law of People’s Police, the Law on Cipher and the Law on professional servicemen and women, national defense workers and officials;
b) His/her age is younger than the retirement age specified in Clause 3 Article 169 of the Labor Code by up to 05 years and he/she has at least 15 years’ doing the laborious, toxic or dangerous works or highly laborious, toxic or dangerous works on the lists of the Ministry of Labor, War Invalids and Social Affairs; or has at least 15 years’ working in highly disadvantaged areas, including the period he/she works in areas with the region factor of at least 0,7 before January 01, 2021; or
c) He/she contracted HIV due to an occupation accident during performance of his/her assigned duty.
3. A female employee that is a commune official or a part-time worker at the commune authority and has paid social insurance for 15 to under 20 years and reaches the retirement age specified in Clause 2 Article 169 of the Labor Code will receive the retirement pension.
4. The Government shall provide for special cases of retirement age.
Thus, to be eligible for a pension, employees must meet both the retirement age conditions and the number of years of social insurance premium payment.
In particular, the number of years of social insurance premium payment should be at least 20 years for both men and women or from 15 to under 20 years for female communal-level officials or part-time officials at communes, wards, or towns.
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