Investment limits of voluntary retirement fund in Vietnam

Investment limits of voluntary retirement fund in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Investment limits of voluntary retirement fund in Vietnam

According to Clause 2, Article 117 of Decree 46/2023/ND-CP, investment limits of voluntary retirement fund are as follows:

- Deposit at a credit institution: not limited to but up to 20% of the total value of assets invested by the voluntary retirement fund in a credit institution;

- Government debt instruments: not limited to but at least 40% of the total value of assets invested by the voluntary retirement fund;

- Government-guaranteed bonds, local government bonds, secured corporate bonds: up to 25% of the total value of assets invested by the voluntary retirement fund;

- Stocks (except shares of securities companies, finance companies, finance leasing companies), unsecured corporate bonds, capital contribution to other enterprises: up to 20% of the total value of assets invested by the voluntary retirement fund;

- Investment in issued shares of an enterprise, corporate bonds: up to 5% of the volume of each issuance and up to 5% of the total value of investment assets of the voluntary retirement fund;

- Investment assets other than those specified at Points a, b, c, d and dd of Clause 2, Article 117 of Decree 46/2023/ND-CP: 0% of the total value of assets invested by the voluntary retirement fund.

2. Retirement insurance accounts in Vietnam

Pursuant to Article 118 of Decree 46/2023/ND-CP stipulate retirement insurance accounts in Vietnam as follows:

- The retirement insurance account is a separate account for each insured person that holds the accumulated premiums paid after deducting the initial fee. The account is opened, monitored, and managed by the insurer.

- The insurer must commit the minimum investment interest rate in the retirement insurance account in the insurance policy. At the end of each fiscal year, the insurer is responsible for announcing the investment interest rate and accumulated account value up to that time.

If the investment returns of the retirement insurance account are lower than the committed interest rate, the insurer must use the assets of its owner’s fund to cover any shortfalls.

In case the insurance policy has an agreement on the accumulation of insurance benefits into the value of the retirement insurance account, these benefits will still be calculated with accrued interest as prescribed at Point c, Clause 2, Article 115 of Decree 46/2023/ND-CP.

- The insured person may not withdraw from the retirement insurance account before the maturity date when he/she reaches the retirement age, as specified in the insurance policy, except for the case specified in Article 119 of Decree 46/2023/ND-CP.

3. Early withdrawal from retirement insurance accounts in Vietnam

According to Article 119 of Decree 46/2023/ND-CP, the insured is entitled to request for early withdrawal and the insurer is responsible for paying part or all of the value of the retirement insurance account in the following cases:

- The insured person has a degree of impairment from 61% or more as per applicable law.

- The insured suffers from a fatal disease as prescribed by law.

- The insured person is a Vietnamese citizen who is legally permitted to reside in a foreign country by a competent authority.

- The insured may withdraw from the retirement account early to pay off their personal loans (except for consumer loans) at a bank, provided that the loan contract must remain valid for at least 24 months before the maturity date of the retirement account.

4. Transfer of retirement insurance accounts in Vietnam

Pursuant to Article 120 of Decree 46/2023/ND-CP, transfer of retirement insurance accounts are regulated as follows:

- If the insured person terminates their employment contract or loses their job and is no longer a member of the group-type policy, they have the following options:

= They transfer the retirement insurance account from the group-type policy to the individual-type policy with the corresponding value at the same insurer; or

= They transfer their retirement insurance account to a group-type policy of the new enterprise. The new group-type policy may be at the same insurer, or another insurer, depending on the type of the new enterprise.

- In case of transfer of the retirement insurance account in the same insurer, based on the written confirmation of premium payment by the policyholder and the written request for account transfer of the insured, the insurer shall transfer the account at requested. The insurer is prohibited from charging a fee for transferring a retirement insurance account.

- In case of switching to a group-type policy at a new insurer, within five working days of receiving the following: a request to transfer the retirement insurance account, and documentation showing that the beneficiary is no longer a member of the group-type policy of the old enterprise and is now a member of group-type policy of the new enterprise, the insurer must transfer the entire value of that account, up to the request date, to the new insurer, after deducting the account transfer fee (if any).

- The transferred retirement account value will accrue according to the agreement in the new group-type policy.

- The new insurer is prohibited from charging an initial fee for the value of the transferred retirement insurance account.

5. Suspension of retirement insurance accounts in Vietnam

Suspension of retirement insurance accounts is specified in Article 121 of Decree 46/2023/ND-CP as follows:

- The policyholder and the insurer may agree to suspend the retirement insurance account temporarily if the policyholder cannot afford the premium.

- During the suspension of the retirement insurance account, the insurer is prohibited from charging any fee to the policyholder. The value of the retirement insurance account is accumulated according to the investment rate announced annually by the insurer as agreed in the insurance policy.

The insurer is not obliged to pay out benefits during the suspension period, except for two cases: periodic retirement benefits when the insured reaches a certain age; or death and disability benefits if the insured dies or has total permanent disability (with the entire value of the accumulated retirement insurance account).

- The policyholder may request the insurer to revalidate the suspended retirement insurance account and resume paying the premium.

Ho Quoc Tuan

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