How to distinguish between retirement insurance and retirement benefits? What are the benefits for participants in retirement insurance and retirement in Vietnam?

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What is retirement insurance in Vietnam?

According to the provisions of Article 2 of Circular 115/2013/TT-BTC and Clause 1 of Article 114 Decree 46/2023/ND-CP on retirement insurance as follows:

Retirement insurance is a life insurance product implemented by the insurer to provide additional income for the insured upon retirement age. Retirement insurance includes 02 types:

- Individual retirement insurance;

- Retirement insurance for groups of employees (group-type retirement insurance); the policyholder is the employer; the employee will receive all benefits of the insurance policy after a certain period of time as agreed between the parties and recorded in the insurance policy

How to distinguish between retirement insurance and retirement benefits? What are the benefits for participants in retirement insurance and retirement in Vietnam?

What is the definition of "retirement benefits" in Vietnam?

Currently, the law does not have a specific definition of "retirement benefits". However, based on Law on Social Insurance 2014, retirement benefits or retirement are one of the compulsory social insurance or voluntary social insurance benefits as stipulated in Article 4 of Law on Social Insurance 2014 as follows:

Social insurance benefits

1. Compulsory social insurance covers the following benefits:

a/ Sickness;

b/ Maternity;

c/ Occupational accident and occupational disease;

d/ Retirement;

dd/ Survivorship allowance.

2. Voluntary social insurance covers the following benefits:

a/ Retirement;

b/ Survivorship allowance.

3. The supplementary retirement scheme shall be stipulated by the Government.

How to distinguish between retirement insurance and retirement benefits in Vietnam?

From the aforementioned regulations,  retirement insurance and retirement benefits are not the same specifically:

Thus, employees in an employment relationship must participate in compulsory social insurance and enjoy retirement benefits. Additionally, employees can purchase extra retirement insurance products from an insurer.

Depending on their needs and actual circumstances, employees can choose suitable retirement insurance products.

What are the benefits for participants in retirement insurance and retirement in Vietnam?

(1) Benefits from retirement insurance:

When participating in retirement insurance, employees will enjoy the benefits from Article 115 Decree 46/2023/ND-CP guiding the Law on Insurance Business, as follows:

Basic insurance benefits of retirement insurance policies

1. An insurer may design their own retirement insurance products but must include periodic retirement benefits as prescribed in Clause 2 of this Article, and death and disability benefits as prescribed in Clause 3 of this Article.

2. As for periodical retirement benefits, the insurer must ensure that:

a) Retirement benefits are paid periodically until the death of the insured or for at least 10 years, depending on the terms of the insurance policy;

b) The insurer and the policyholder agree on the amount of retirement benefits each period, the number of periods to receive retirement benefits;

c) Calculating the accrued interest from the unpaid retirement benefits to the policyholder, but not lower than the committed minimum investment interest rate agreed upon in the insurance policy.

3. With regard to death and disability benefits, the insurer must ensure that the policyholder is entitled to these benefits while the insurance premiums are still being paid, and the insurer may continue to provide these benefits while the insurance benefits are being paid, depending on the terms of the insurance policy. Death and disability benefits include at least the following benefits:

a) Funeral allowance benefits:

Upon receipt of a claim for payment of death benefits, the insurer must immediately pay the beneficiary(ies) the funeral allowance agreed upon in the insurance policy, regardless of whether the policyholder had sufficient coverage.

b) Death benefits and total permanent disability benefits:

If the insured person's death or total permanent disability is covered by the insurance policy and occurs within the prescribed time limit, the insurer must pay the beneficiary the sum insured agreed upon in the insurance policy;

The policyholder is entitled to choose the sum insured when entering into the insurance policy and may adjust the sum insured during the effective period of the insurance policy as agreed in the insurance policy.

Thus, when participating in retirement insurance, individuals will enjoy the benefits of:

- Periodic retirement benefits

- Risk insurance

(2) Benefits from retirement

Participating in compulsory social insurance:

When meeting the conditions, employees will be entitled to the following pension:

Clauses of Article 56 Law on Social Insurance 2014, guided by Article 7 of Decree 115/2015/ND-CP, stipulates that the monthly pension amount for employees is 45% of the average monthly salary for social insurance contributions, in accordance with Article 62 of the Law on Social Insurance 2014, corresponding to the number of years of social insurance contributions as follows:

- Male employees retiring in 2018 contribute 16 years, 2019 is 17 years, 2020 is 18 years, 2021 is 19 years, and from 2022 onward it will be 20 years;- Female employees retiring from 2018 onward contribute 15 years.

After that, an additional 2% is added for each additional year; the maximum is 75%.

Besides, employees are also entitled to a one-time allowance upon retirement according to Article 58 of the Law on Social Insurance 2014.

Participating in voluntary social insurance:

According to Article 74 Law on Social Insurance 2014, the monthly pension for voluntary social insurance participants starting in 2023 is determined as follows:

Monthly pension = Percentage (%) of monthly pension benefits x Average monthly income subject to social insurance

In which:

The percentage (%) of monthly pension benefits is determined as follows:

- For male employees:

+ 20 years of social insurance contribution for 45% (Participants retiring in 2023, contributing 20 years for 45%)

+ For each additional year of social insurance contribution, an additional 2% is added.

- For female employees:

+ 15 years of social insurance contribution for 45%.

+ For each additional year of social insurance contribution, an additional 2% is added.

Note: The maximum benefit is 75%.

The average monthly income subject to social insurance is calculated as the average of the monthly incomes subject to social insurance for the entire period of contributions.

In addition, voluntary social insurance participants may also receive a one-time allowance upon retirement according to Article 75 of the Law on Social Insurance 2014.