Vietnam: How much will the pension for retirees before July 1, 2024 increase when implementing salary reform?
How much will the pension for retirees before July 1, 2024 increase when implementing salary reform in Vietnam?
At the 31st session on the afternoon of March 15th, the Standing Committee of the National Assembly provided opinions on the explanation, absorption, and adjustment of the draft Law on Social Insurance (amended).
The Minister of Labor - Invalids and Social Affairs expressed the following viewpoint:
"Our viewpoint is that the adjustment of the pension rate should not be lower than 50% compared to the salary increase after the reform to ensure harmony, balance, and prevent retirees from being left behind or disadvantaged during the salary reform," emphasized the Minister.
Regarding the current issue of pension increase, the Minister of Labor - Invalids and Social Affairs reported that after considering the opinions of the Central Steering Committee on salary reform, the Ministry has developed a plan to adjust the pension, dividing it into 3 groups:
- The first group consists of ordinary retirees. For this group, the pension increase will be calculated reasonably based on the working area and ensure harmony between individuals in the same position before and after July 1, 2024.
- The second group consists of retirees before July 1, 2024. The state needs to apply compensation measures to reduce the salary gap between retirees before and after the policy reform.
- The third group consists of retirees before 1995. The Minister stated that there will be special policies to further increase their pension.
Therefore, starting from July 1, 2024 when implementing salary reform, it is expected that retirees before July 1, 2024 will receive an appropriate increase in pension to ensure it is not lower than 50% compared to the salary increase after the reform, in order to maintain harmony, balance, and prevent retirees from being left behind or disadvantaged during the salary reform.
The state will apply compensation measures to reduce the salary gap between retirees before and after the policy reform.
Vietnam: How much will the pension for retirees before July 1, 2024 increase when implementing salary reform?
How to calculate pension in Vietnam from July 1, 2024 when the statutory pay rate is annulled?
Pursuant to Resolution 27-NQ/TW in 2018 on salary reform, the statutory pay rate is mentioned as follows:
Reform content
3.1. For officials, public employees, and armed forces (public sector)
...
c) Determine specific factors to design new payrolls
- Annul the statutory pay rate and current salary coefficients, and establish base pay as a specific amount in the new payrolls.
From the above regulations, it can be seen that the salary reform policy will annul the statutory pay rate from July 1, 2024.
So, how will the pension calculation be affected?
Pursuant to the current provisions in Article 7 of Decree 115/2015/ND-CP, for compulsory social insurance participants, the calculation of pension in 2024 is based on the monthly pension rate and the average monthly salary as the basis for social insurance payment.
Specifically, the calculation of pension is in the following formula:
Monthly pension | = | Monthly pension rate | X | Average monthly salary as the basis for social insurance payment |
Therefore, according to the above formula, the statutory pay rate is not directly adjusted in the calculation of monthly pension. Therefore, it is expected that when the statutory pay rate is removed from 01/07/2024, the aforementioned pension calculation method may not change until new regulations are issued.
For individuals whose pensions are adjusted from July 1, 2024, the formula for calculating the monthly pension can be as follows:
Adjusted monthly pension | = | Adjusted monthly pension rate | + | (Adjustment rate x Pre-adjustment pension amount). |
However, regarding the minimum pension amount as regulated in the 2014 Law on Social Insurance, it is equal to the statutory pay rate. Therefore, when the statutory pay rate is annulled, new guidance is needed regarding the provision on the minimum pension amount.
How long does it take to pay compulsory social insurance to receive pension in Vietnam?
Pursuant to Article 54 of the Law on Social Insurance 2014, amended by Point a, Clause 1, Article 219 of the 2019 Labor Code, there are regulations on pension eligibility conditions for participants in compulsory social insurance as follows:
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
In order to receive a pension, workers need to meet the conditions for retirement age and the number of years of social insurance contributions.
Among them, the minimum number of years of social insurance contributions is at least 20 years for both men and women, or having at least 15 years but less than 20 years of social insurance contributions for female workers who are village-level officials or non-professional workers in communes, wards, or towns
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