The World Bank this week (19 July) released a report on Vietnam that emphasizes the challenges of coping with an ageing population. I have not seen the report, but an online news feed provides a brief summary. Here are some extracts.
[T]he rate of participation of the people in the retirement fund is still low, reaching only 22% of the workforce, while the majority are only entitled to a small social pension if they live to the age of 80.
The [contributory] pension system in the formal sector is financially unsustainable though it underwent reform in 2014. ….
[A proposal to lower] the age … [of eligibility for the] social pension from the current level of 80 years … has … not yet [been] approved. …. Besides, the social pension is very low, only equivalent to 10% of the average income ….
The official [contributory] pension … [is] currently … 3% for women for each year of contribution and 2.25% for men. Compared to international standards, this is a very high rate and unsustainable ….
Despite the high rate, the practical benefit is lower because most people only contribute based on the basic salary, which is usually the minimum wage.
In 2014, the Vietnamese government implemented reforms to expand the contribution base … [to include] not only the basic wage but also allowances, bonuses and other remuneration regimes. ….
[The World Bank recommends three policy changes.]
Firstly, gradually reduce the social pension age from 80 to 70. Secondly, … expand the … subsidized program [of social pensions for the informal sector]. [Emphasis added.]
Thirdly, … Vietnam cannot maintain the current [contributory] system without reform.
“WB report: Vietnam’s pension system faces challenges“, VietNamNet Bridge, 22 July 2016.
HelpAge International (Pension Watch) reports that Vietnam’s social pension of 180,000 Dong (9 US$) a month is pension-tested for those aged 80 and older, and means-tested for those aged 60-79 years. The social pension, according to the same source, reaches 2% of Vietnam’s 60+ population.
I don’t understand the discrepancies between information from the World Bank and that from Pension Watch. Is there a social pension for persons aged 60-79 years? Or is it limited to those aged 80 and older? If the social benefit is pension-tested for those aged 80 years and older, this implies that 100% of the 80+ population receives some sort of cash pension, unless take-up of the social pension is low for reasons other than eligibility.
Perhaps someone from Pension Watch can clarify this. I appreciate the good work that Help Age does, filling gaps in our knowledge of social pensions. Non-contributory pensions are sadly neglected by the World Bank, ILO and other institutions, so the country data posted at Pension Watch are very helpful.