There will be many cases of ineligibility for lump-sum social insurance withdrawal from 2025 in Vietnam (Draft)

Greetings, Lawnet provides the following answers:

The Draft Law on Social Insurance will be presented for discussion at the National Assembly session in October 2023 and passed during the session in May 2024.

1. Cases with limited allowances to withdraw lump-sum social insurance in Vietnam

The Ministry of Labor, War Invalids and Social Affairs (MOLISA) proposes additional measures to limit the situation of withdrawing lump-sum social insurance. It includes provisions for the right to receive lump-sum social insurance for two different groups of employees.

(1) First Option:

Withdrawal of lump-sum social insurance will be addressed for two different groups of employees, including:

- Group contributing to Social Insurance before the amended Social Insurance Law takes effect (before January 1, 2025), who can withdraw in one lump sum after 12 months of unemployment without continuing participation.

Employees can choose to preserve the contribution time or withdraw if needed. If they choose to preserve, they will enjoy additional benefits.

- Group participating after the effective date of the amended Law (from January 1, 2025), who are not allowed to withdraw lump-sum social insurance, except for those of retirement age but not having enough years of contribution to receive a pension; emigrating abroad to settle; or suffering from one of the life-threatening diseases.

MOLISA evaluates that this option will be sustainable for the social safety net and will not affect the 17.5 million participants currently in the Social Insurance system, thus minimizing adverse reactions. Initially, it may not reduce the number of lump-sum withdrawals, but from 2030 onward, it could be halved.

(2) Second Option:

Employees participating in Social Insurance for fewer than 20 years, who after 12 months do not continue compulsory or voluntary contributions, may request a lump-sum lump sum withdrawal of no more than 50% of the total contribution to the pension and death gratuity fund. The remaining time will be preserved to continue participating in the social security system and enjoy benefits.

MOLISA considers this option more balanced between the participants' rights and long-term social security policies, avoiding negative reactions. The number of beneficiaries may not significantly decrease, but it will retain employees within the social safety net. If they continue contributing to Social Insurance later, their contribution time will be combined to enjoy benefits.

Nearly 91% of employees withdrawing lump-sum social insurance work in enterprises; 8% work in the state sector, and more than 1% participate in voluntary Social Insurance. According to the management agency, private sector and FDI employees face high job pressure, leading to frequent job changes. They often opt for unemployment benefits or lump-sum Social Insurance withdrawal while searching for new jobs.

Earlier, MOLISA submitted the draft amended Social Insurance Law to the Government of Vietnam. The drafting committee proposed three options for lump-sum Social Insurance withdrawal for comments from Government members. Specifically:

- Option 1: Employees after 12 months of unemployment, not continuing compulsory or voluntary Social Insurance contributions, with less than 20 years of contribution, can receive Social Insurance in a lump-sum lump sum (similar to the current regulation).

- Option 2: After 12 months of unemployment, not continuing compulsory or voluntary Social Insurance contributions, with less than 20 years of contribution, can receive a lump-sum lump sum but not exceeding 50% of the contribution time to the pension and death gratuity fund. The remaining contribution time will be preserved for future contributions or to enjoy benefits after retirement age.

- Option 3: Policies for lump-sum Social Insurance withdrawal do not apply to new participants after this law takes effect (expected from after January 1, 2025). This final option maintains that current participants still enjoy the lump-sum Social Insurance policies, while new participants after the new law's effective date will no longer have this option.

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