Viet Nam: Pension system in 2020
Viet Nam Social Security (VSS) manages and administers social security contributions and benefits (including pensions) for both private sector workers and government workers. The current pension scheme is a pay-as-you-go defined benefit (PAYG DB) scheme.
The normal pension age was 60 for men and 55 for women in 2020, with a minimum of 20 years of contributions. From 1 January 2021 the retirement age will increase by 3 months per year for men, reaching 62 in 2028 and 4 months per year for women, reaching 60 in 2035.
A lump sum payment is made for people with shorter contribution periods.
Earnings-related
45% of the insured’s average monthly covered earnings is paid for the first 18 years (men, gradually rising to 20 years by 2022) or 15 years (women) of contributions plus 2% of the insured’s average monthly covered earnings for each year of contributions exceeding 18 years (men, gradually rising to 20 years by 2022) or 15 years (women). The maximum accrual is 75%.
Old-age grant
If total contributions are less than 20 years, retirees receive a lump sum is paid of 1.5 times the insured’s covered average monthly earnings in the last five years for years of contributions before 2014, plus 2 times the insured’s covered average monthly earnings in the last five years for contributions since 2014.
Old-age social assistance
According to the Decree 20/2021/NĐ-CP dated 15 March 2021 with effect from 1 July 2021, a minimum social pension is VND 360 000. A multiplier is applied with this minimum level: (i) 1.5 (or benefit is VND 540 000) for those aged 60 to 79 who are living in poor households without family members, or with support from family members who are also receiving social assistance benefits; (ii) 2 (or benefit is VND 720 000) for those aged 80 and over who are living in poor households without family members, or with support from family members who are also receiving social assistance benefits; and 1 (or benefit is VND 360 000) for those aged 80 and over who do not have any social insurance and assistance benefits; and (iii) 3 (or benefit is VND 1 080 000) for any older people who are living in poor households without family members but receiving support from community.
Early retirement
It is possible to retire and to start claiming the pension at age 55 for men and 50 for women under specific requirements. The pension is reduced by 2% of the insured’s covered average monthly earnings for each year the pension is taken before the insured’s normal pensionable age due to reduced working capacity.
Late retirement
It is not possible to start claiming a pension after the normal pension age. It is possible, however, to combine working and receiving pension.
Taxation of workers
There is a personal allowance of VND 9 million per month.
Taxation of worker’s income
Tax rates applicable to regular annual income are as follows:
Social security contributions payable by workers
Employees pay 8% of monthly salary/wage for retirement benefits. The minimum and maximum monthly earnings for contribution and benefit calculation purposes are the minimum wage and 20 times of the minimum wage, respectively. From 1 July 2019 onwards they are VND 1 490 000 and VND 29 800 000, respectively. In addition, employees pay 1.5% health contributions and 1.0% for unemployment insurance.
Taxation of pension income
There is no additional tax relief for pensioners.
Social security contributions payable by pensioners
Pensioners do not pay any social security contributions.
Note: Real rate of return 3%, real earnings growth 1.25%, inflation 2%, and real discount rate 2%. All systems are modelled and indexed according to what is legislated. Transitional rules apply where relevant. DC conversion rate equal 90%. Labour market entry occurs at age 22 in 2020. Tax system latest available: 2020.
Source: OECD pension model.