Pension Strongly Affected by 03 Regulations Implemented from January 01, 2020

****PROPOSED SALARY SCHEDULE FOR TEACHERS OF ALL LEVELS IN 2020

1. Regulation on Change in Retirement Pension Ratio for Male Laborers

According to Article 56 of the 2014 Social Insurance Law, for male laborers retiring from 2020 onwards, achieving a 45% ratio will correspond to 18 years of social insurance contributions. This is an increase of 1 year compared to retirement in 2019 (retirement in 2019 required 17 years of contributions to achieve 45%). Thereafter, for each additional year of social insurance contributions, an additional 2% is added, with a maximum of 75%.

Example: Mr. A is eligible for retirement and has 28 years of social insurance contributions.

- If Mr. A retires in 2020, the benefit ratio will be: 18 years of social insurance contributions = 45%; remaining 10 years x 2% = 20%. Therefore, Mr. A's retirement pension ratio is 65% of the average monthly wage on which social insurance was calculated.

- If Mr. A retires in 2019, the benefit ratio will be: 17 years of social insurance contributions = 45%; remaining 11 years x 2% = 22%. Therefore, Mr. A's retirement pension ratio is 67% of the average monthly wage on which social insurance was calculated.

Illustration (Source: Internet)

2. Regulation on Change in Calculation Method for Average Monthly Earnings on Social Insurance Contributions

This change is mentioned in Point e, Clause 1, Article 62 of the 2014 Social Insurance Law.

To be specific: for laborers participating in social insurance from January 01, 2020, to December 31, 2024, the retirement pension will be calculated based on the average monthly wage of the last 20 years before retirement.

Meanwhile, for those participating in social insurance from January 01, 2016, to December 31, 2019, the average monthly wage on which social insurance contributions are calculated is based on the last 15 years before retirement.

3. Regulation on Change in Conditions for Early Retirement Due to Reduced Work Capacity

Currently, in 2019, males who are 54 years old, and females who are 49 years old and have a reduced work capacity of 61% or more, are eligible for retirement pension.

However, starting from 2020, those with a reduced work capacity of 61% or more will need to be at least 55 years old for males and 50 years old for females to be eligible for pension.

This content is based on Point a, Clause 1, Article 55 of the 2014 Social Insurance Law.

Duy Thinh

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