Base salary and regional minimum wage increases lead to an increase in pension; the number of years of social insurance participation used as a basis for determining the pension replacement rate of male workers increases; the age for receiving pension upon reduction in working capacity increases;... these are important changes in pensions in 2020 for officials and public employees and laborers.
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Policies for Early Retirees in 2020
1. Base Salary and Regional Minimum Wage Increase, Leading to Higher Pensions
To be specific, according to Decree 90/2019/ND-CP, compared to the regional minimum wage stipulated in Decree 157/2018/ND-CP, the regional minimum wage in 2020 for workers in enterprises operating in areas classified into regions has been adjusted as follows:
- Region I: From January 1, 2020, it is VND 4,420,000/month, currently VND 4,180,000/month (an increase of VND 240,000/month);
- Region II: From January 1, 2020, it is VND 3,920,000/month, currently VND 3,710,000/month (an increase of VND 210,000/month);
- Region III: From January 1, 2020, it is VND 3,430,000/month, currently VND 3,250,000/month (an increase of VND 180,000/month);
- Region IV: From January 1, 2020, it is VND 3,070,000/month, currently VND 2,920,000/month (an increase of VND 150,000/month).
Thus, we can see that from January 1, 2020, the regional minimum wage will increase ranging from VND 150,000/month to VND 240,000/month, with the highest increase of VND 240,000/month applied to workers in enterprises operating in Region I.
Regarding the statutory pay rate, on November 12, 2019, at the 8th session of the 14th National Assembly, Resolution 86/2019/QH14 on the state budget estimate for 2020 was approved. The National Assembly assigned the Government of Vietnam to adjust the statutory pay rate from VND 1.49 million/month to VND 1.6 million/month and adjust pensions, social insurance benefits, monthly allowances accordingly (for those ensured by the state budget) and preferential benefits for people with meritorious services to the revolution to increase by the statutory pay rate from July 1, 2020.
Therefore, from July 1, 2020, the statutory pay rate for officials and public employees and the armed forces will be VND 1,600,000/month (an increase of VND 110,000/month compared to the present).
The increase in the statutory pay rate and regional minimum wage will significantly affect the monthly salary/income subject to social insurance contributions of participants (the monthly salary subject to compulsory social insurance is not lower than the regional minimum wage and not higher than 20 times the statutory pay rate).
Additionally, under Article 57 of the Law on Social Insurance, the Government of Vietnam adjusts pensions based on the increase in the consumer price index and economic growth in line with the state budget and social insurance fund. Thus, increasing the statutory pay rate and regional minimum wage will also be a premise for increasing the monthly pension level of officials and public employees and workers nationwide.
2. Increase in the Number of Years of Social Insurance Contributions Required to Determine the Rate of Pension for Male Workers
Specifically, according to Point a, Clause 2, Article 56, and Point a, Clause 2, Article 74 of the Law on Social Insurance, male workers retiring in 2020 must have 18 years of social insurance contributions to receive a 45% pension rate. For each additional year, the worker will be entitled to an extra 2%. (Previously, if retiring in 2018, the number of years of social insurance contributions required was 16 years, and in 2019, it was 17 years)
3. Increase in the Age to Receive Pension When Suffering from Reduced Work Capacity
Specifically, according to Point a, Clause 1, Article 55 of the Law on Social Insurance, from 2016, men aged 51, women aged 46, and those with a work capacity reduction of 61% or more are eligible to receive a pension. However, from 2020, men aged 55 and women aged 50 will be eligible for pension benefits.
4. Female Workers Retiring in 2020 to Receive an Additional Amount
Specifically, according to Decree 153/2018/ND-CP, in 2020, female workers starting to receive a pension with 20 years to 29 years 6 months of social insurance contributions will have their pension adjusted as follows:
Adjusted Pension = Calculated Pension in accordance with the Law on Social Insurance 2014 + Adjustment Amount
Where:
Adjustment Amount = Calculated Pension in accordance with the Law on Social Insurance 2014 at the time of starting to receive the pension x Adjustment Rate corresponding to the duration of social insurance contributions
In summary, if female workers retire in 2020 with 20 to 29 years 6 months of social insurance contributions, they will receive an additional amount calculated by multiplying the pension under the Law on Social Insurance 2014 at the time of starting to receive the pension by the adjustment rate corresponding to the duration of social insurance contributions, in addition to the pension received under the Law on Social Insurance 2014.
See the detailed adjustment rate corresponding to the duration of social insurance contributions for female workers HERE.
Nguyen Trinh
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