Vietnam’s increase of retirement ages should be done early to protect the economy from negative impacts, according to a specialist of the International Labor Organization (ILO).

Nuno Cunha, senior social protection specialist at the International Labor Organization

Nuno Cunha, senior social protection specialist at the ILO, told the Daily that challenges faced by the social insurance system can only be solved by changing parameters of the system, one of which is retirement age.

According to Cunha, increasing retirement ages is what many regional countries have done. In comparison to countries which have the same average life expectancy as in Vietnam, Vietnam’s retirement ages are lower.

He said it would be a tough decision if employees did not want their retirement ages revised up.

However, data showed that Vietnamese women, once reaching the age of 60, would have average life expectancy of 81.6 years. If so, when retiring at 55, Vietnamese women would get pensions in over 26 years.

Cunha explained that if one of them starts to work at 25, she may contribute social insurance in 30 years maximum. It is hence unreasonable for a person to pay in 30 years and receive pensions in 26 years.

Besides higher life expectancy, the ratio of working-age people to one elderly person would drop from 6.6 to around two.

Retirement ages have been proposed going up by three months each year as from 2020, which means women would not retire at 56 until 2024 and at 57 until 2028. This gradual increase approach will enable people and the economy to adjust, Cunha said.

According to Cunha, there are three main ways to ensure the financial sustainability of a social security system, which are reducing benefits, increasing retirement ages and hiking contributions. With each having different impacts on the system, employees and employers, it is necessary to find a solution that balances these three ways and carry out reforms gradually to make sure employees and employers have enough time to adjust.

Increasing social insurance contributions is not simple as enterprises have kept complaining about high payments. Reducing benefits is not good either as pensions are already low. The only feasible solution is increasing retirement ages.

SGT