What are the disadvantages of lump-sum social insurance payout compared to continuing contributions to receive a pension in Vietnam according to Official Dispatch 1488/BHXH-TT in 2024?

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The disadvantages of lump-sum social insurance payout compared to continuing contributions to receive a pension in Vietnam

On May 22, 2024, the Vietnam Social Insurance issued Official Dispatch 1488/BHXH-TT in 2024 to strengthen communication on the topic of one-time social insurance.

According to Appendix I issued in conjunction with Official Dispatch 1488/BHXH-TT in 2024, the disadvantages of lump-sum social insurance payout compared to continuing contributions to receive a pension are as follows:

Assume the employee has completed 20 years of social insurance contributions (from 2003-2022), including 11 years before 2014 and 9 years from 2014 onwards, with an average monthly salary of 6 million VND. Assuming the employee qualifies for a pension or one-time social insurance in 2024, the amount received would be:

(1) In case of lump-sum social insurance payout, the amount received would be:

6,000,000 VND x (1.5 x 11 years + 2 x 9 years) = 207,000,000 VND.

(2) In case the employee has completed 20 years of social insurance contributions and qualifies for a pension, the total benefits would be:

- For male employees (at the age of 61, based on the average life expectancy of Vietnamese men being 71.1 years, the estimated pension period is 10.1 years, equivalent to 121 months):

+ Pension rate at 45%, pension amount is 6,000,000 x 45% = 2,700,000 VND.

Total pension amount received is: 121 x 2,700,000 VND = 326,700,000 VND.

+ Purchase health insurance card (4.5% monthly pension):

4.5% x 121 x 2,700,000 = 14,701,500 VND.

+ Funeral expense allowance (10 months of statutory pay rate): 18,000,000 VND.

+ One-time survivorship allowance (03 months of pension before death): 8,100,000 VND.

Total amount received from the social insurance fund is: 367,501,500 VND.

- For female employees (at the age of 56 years 4 months, based on the average life expectancy of Vietnamese women being 76.5 years, the estimated pension period is 20 years 2 months, equivalent to 242 months):

+ Pension rate at 55%, pension amount is 6,000,000 x 55% = 3,300,000 VND.

Total pension amount received is: 242 x 3,300,000 VND = 798,600,000 VND.

+ Purchase health insurance card (4.5% monthly pension):

4.5% x 242 x 3,300,000 = 35,937,000 VND.

+ Funeral expense allowance (10 months of statutory pay rate): 18,000,000 VND.

+ One-time survivorship allowance (03 months of pension before death): 9,900,000 VND

Total amount received from the social insurance fund is: 862,437,000 VND.

What are the disadvantages of lump-sum social insurance payout compared to continuing contributions to receive a pension in Vietnam according to Official Dispatch 1488/BHXH-TT in 2024? (Image from Internet)

What is the monthly pension amount for participants in compulsory social insurance in Vietnam in 2024?

According to Article 7 of Decree 115/2015/ND-CP concerning the monthly pension amount:

Monthly Pension Amount

The monthly pension amount specified in Article 56 of the Social Insurance Law is as follows:

1. The monthly pension amount of the employee is calculated by multiplying the monthly pension rate by the average monthly salary used for social insurance contributions.

2. The monthly pension rate of the employee who meets the conditions for receiving a pension as stipulated in Article 54 of the Social Insurance Law is calculated as follows:

a) For employees retiring from January 1, 2016, to before January 1, 2018, the monthly pension rate is calculated at 45% corresponding to 15 years of social insurance contributions, thereafter an additional 2% per year for men and 3% per year for women; the maximum rate is 75%;

b) For female employees retiring from January 1, 2018, the monthly pension rate is calculated at 45% corresponding to 15 years of social insurance contributions, thereafter an additional 2% per year; the maximum rate is 75%;

c) For male employees retiring from January 1, 2018, the monthly pension rate is calculated at 45% corresponding to the number of years of social insurance contributions as shown in the table below; thereafter an additional 2% per year, with a maximum rate of 75%.

.....

The 2024 pension amount includes:

The monthly pension rate is determined as follows:

- employees retired from January 1, 2016, to before January 1, 2018:

+ The monthly pension rate is calculated at 45% corresponding to 15 years of contributions.

+ Thereafter an additional 2% per year for men and 3% per year for women, with a maximum rate of 75%.

- Male employees retiring from January 1, 2018.

The monthly pension rate is 45% of the average monthly salary used for social insurance contributions corresponding to the number of years of social insurance contributions as shown in the table below. Thereafter an additional 2% per year, with a maximum rate of 75%.

- Female employees retiring from January 1, 2018 onward.

The monthly pension rate is 45% of the average monthly salary used for social insurance contributions corresponding to 15 years of social insurance contributions. Thereafter an additional 2% per year, with a maximum rate of 75%.

Thus, the pension amount for employees participating in compulsory social insurance is calculated according to the formula outlined above.

What are the conditions for employees to receive a pension in Vietnam in 2024?

The conditions for employees to receive a pension in 2024 are stipulated in Article 54 of the 2014 Social Insurance Law as amended by point a clause 1 Article 219 of the 2019 Labor Code:

Eligibility for Pension

1. The employees specified in points a, b, c, d, g, h, and i clause 1 of Article 2 of this Law, excluding the cases specified in clause 3 of this Article, upon termination of employment and having paid social insurance contributions for at least 20 years, are entitled to a pension if they meet one of the following conditions:

a) Reaching the age specified in clause 2 of Article 169 of the Labor Code;

b) Reaching the age specified in clause 3 of Article 169 of the Labor Code and having 15 years of heavy, hazardous, dangerous work or particularly heavy, hazardous, dangerous work on the list issued by the Ministry of Labor - Invalids and Social Affairs, or having 15 years of work in areas with extremely difficult socio-economic conditions including time working in areas with a regional allowance coefficient of 0.7 or higher before January 1, 2021;

c) Having a lower age by a maximum of 10 years than the retirement age stipulated in clause 2 of Article 169 of the Labor Code and having 15 years of working in coal mining in underground pits;

d) Being infected with HIV due to occupational accidents during the performance of assigned tasks.

2. The employees specified in points đ and e of clause 1 of Article 2 of this Law, upon termination of employment and having paid social insurance contributions for at least 20 years, are entitled to a pension if they meet one of the following conditions:

a) Having a lower age by a maximum of 5 years than the retirement age specified in clause 2 of Article 169 of the Labor Code, except for cases where the Law on Officers of the Vietnam People's Army, the Law on People's Public Security Forces, the Law on Cryptography, the Law on Professional Soldiers, Defense employees and Public Employees have other provisions.

b) Having a lower age by a maximum of 5 years than the retirement age specified in clause 3 of Article 169 of the Labor Code and having 15 years of heavy, hazardous, dangerous work or particularly heavy, hazardous, dangerous work on the list issued by the Ministry of Labor - Invalids and Social Affairs, or having 15 years of work in areas with extremely difficult socio-economic conditions including time working in areas with a regional allowance coefficient of 0.7 or higher before January 1, 2021;

c) Being infected with HIV due to occupational accidents during the performance of assigned tasks.

3. Female employees who are officials at communal or non-specialist employees at commune, ward, or commune-level town, upon termination of employment and having 15 to less than 20 years of social insurance contributions and reaching the retirement age prescribed in clause 2 of Article 169 of the Labor Code, are entitled to a pension.

Therefore, employees who want to receive a pension must meet the above conditions.