The draft decree on supplemental pension insurance (SPI) is currently being developed by the Ministry of Finance for the Social Insurance Law 2024. This aims to diversify the social security system, reduce budget pressure, and promote the development of long-term capital markets.

The decree also targets transparency in state policies, encouraging both employees and employers to participate in SPI while supporting the growth of capital and bond markets by expanding the long-term investor base.

Under the draft decree, eligible participants for SPI include employers and employees who are already participating in mandatory social insurance as prescribed by the Social Insurance Law.

SPI is implemented on a voluntary basis through employers and is managed by fund management companies. Contribution levels are negotiated between employees and employers, based on financial conditions and the labor management requirements of each enterprise.

The conditions for employees to benefit from employer contributions and investment returns from those contributions must be specified in a written agreement between the two parties, ensuring that the maximum period for an employee to participate in SPI does not exceed five years.

Employees receive employer contributions and investment results upon meeting the agreed conditions or in special cases such as death; serious illness; reduction in working capacity by 81 percent or more; settling abroad; or foreign workers terminating their employment in Vietnam.

Employers are responsible for making full and timely contributions for their share and the portion entrusted by employees as per the agreement. They must ensure a clear separation between the two contribution sources and fulfill all obligations according to the registered SPI program.

Additionally, employers must provide full, timely, and accurate information regarding employees and their insurance participation process to the fund management company.

Employees have the right to voluntarily participate, suspend, or terminate SPI participation according to the agreement. They are entitled to receive supplemental pension payments and enjoy personal income tax incentives as prescribed by law.

Employees can monitor their insurance contributions, request the company to fulfill its responsibilities, receive periodic information about their individual pension accounts, have their information kept confidential, and maintain their accounts after terminating labor contracts or reaching retirement age.

Furthermore, participants have the right to designate heirs, file complaints or lawsuits according to the law, and are guaranteed a minimum payout by the pension fund upon retirement through a periodic payment life insurance contract.

Creating financial management habits

Nguyen Thuong Lang, a senior lecturer at the Institute of International Trade and Economics (National Economics University), called SPI a progressive policy that aligns with international trends and meets the actual needs of workers.

If implemented effectively, SPI will become a solid pillar alongside mandatory social insurance, contributing to the improvement of quality of retirement life and reducing long-term pressure on the state budget. 

Given current modest pension levels, SPI is essential to help people gain stable income in their later years.

"Many workers receive pensions that only meet a portion of their living needs. SPI thus becomes a channel helping them gain significant additional income from savings accumulated since their youth," Lang said.

He added that the SPI model contributes to forming effective personal financial management habits: "Many people have good incomes but lack planned spending. Participating in SPI forces them to save with a goal, looking toward the future instead of emotional consumption."

The expert also noted that many countries implemented this model long ago. Foreign insurance companies have extensive experience in risk management and cost optimization. If Vietnam does not develop this model soon, the market could easily fall into the hands of international corporations.

Vietnam has piloted voluntary supplemental pension funds since 2017 under Decree 88/2016/ND-CP. After nearly eight years of operation, this model has shown positive signals, serving as an important basis for the government to finalize the new decree for wider implementation.

The funds are managed by insurance enterprises or securities investment fund management companies qualified by the Ministry of Finance. The goal is capital preservation, cautious investment, and stable profitability for participants.

By the end of 2024, there were seven active supplemental pension funds in the system; total assets reached VND1,549 billion, an 18-fold increase compared to 2021 and up 68.7 percent compared to 2023.

Vu Diep