VietNamNet Bridge – Officials have warned of a looming deficient pension and death gratuity fund if drastic flaws in the existing social care system were not addressed.

Retirees receive pension payments in HCM City's District 3. (Photo: VNS)

Yet from 2024, pension and death gratuity spending would have to not only draw on the collected social insurance fees but from the surplus of previous years, he said.

The vice chairman warned that remaining social insurance would be exhausted by 2037 if the State did not increase collection and reduce expenditure.

A Ministry of Labour, Invalids and Social Affairs (MoLISA) Social Insurance Agency report showed the collection of fees would equal 72 per cent of expenditure by 2038.

More than VND800 trillion (US$38 billion) would be the deficit each year, it said.

Chief of the Social Insurance Agency Tran Thi Thuy Nga said that spending on pensions and death gratuity accounted for 73.29 per cent of the total premium collected from employers and employees in 2008 and 88.5 per cent in 2009.

World Bank experts said that the total premium paid by employers and employees, plus the interest collected, would only be enough to cover retirement pensions for the next ten years.

The average period for receiving retirement pension in Viet Nam is 19.5 years.

"Funds for pensions and death gratuity can't sustain coverage in the long run," Nga said.

She added that only around 20 per cent of retired people had pensions. A large number of elderly people aged between 60 and 80 years, meanwhile, had neither social insurance nor any monthly allowances arrears.

Loi and Nga attributed the possibly shakeable pension and death gratuity fund to inadequate regulations based on retirement age and pension.

Existing regulations have allowed labourers to retire much earlier than 55 for women and 60 for men, increasing the number of retired people.

The situation has adversely affected the fund's balance and stability because some people are able to benefit pensions for longer periods while paying lower social insurance fees, Loi said.

While 217 labourers were paying social insurance fees for each retired person in 1996, these figures dropped to 34 in 2000 and 10.7 labourers in 2010, according to MoLISA statistics.

Another major reason for the dysfunctional social insurance fund was employee premium debts, Nga said.

Addressing a conference on the Social Insurance Law in HCM City on Tuesday, a representative from HCM City Social Insurance told participants that up to 19,139 companies owed VND374 billion ($17 million) worth in premiums out of over 687 thousand employees in 2010.

Head of the Social Insurance Policy Department Dieu Ba Duoc said that delayed premium payments remained common among non-State and foreign invested enterprises, which accounted for over 70 per cent of the debt.

Viet Nam Social Insurance forecast that premium arrears would increase to VND6 trillion ($285 million) by the end of this year.

Company General Director Le Bach Hong said that there were few tools to force enterprises to make on time payments on time.

He said strong measures such as taking criminal proceedings against evaders should be implemented to prevent repeat offences.

Hong additionally proposed an interest rate increase on enterprise premiums, against the current 10 per cent annual rate.

Raising retirement pensions after minimum wage adjustments was also blamed for the imbalance between social insurance fee collection and pension payment.

Hong cited cases of retired people whose pensions were now even higher than their previous salaries.

Loi said that the recent National Assembly session had approved amendments to the Social Insurance Law to make it more effective.

VietNamNet/Viet Nam News