Le Thi Hang, 40, is a worker at a paper plant in Dong An industrial zones (IZs) in Binh Duong province. After the Covid-19 pandemic, the company had few orders and there were not enough jobs for all workers, which resulted in sharp income decreases. Hang is considering quitting the job and getting a lump-sum social insurance withdrawal.
With 15 years of paying social insurance premiums, Hang expects to receive a lump sum of VND 200 million, an amount of money that can help solve some problems of her family and stabilize their lives.
Asked about her decision, Hang said at the age of 35-40, if workers have paid social insurance premiums for 20 years, employees will still have to wait 15-20 more years to be eligible for receiving pensions. Therefore, instead of sitting and waiting for pensions, they would rather get an amount of money at once to have capital to do private business after leaving enterprises.
“The policy on retirement age has changed. Under the new policy, the age of retirement in Vietnam is 62 for males and 60 for females. It is the new policy which has prompted employees to change their mind and think of short-term instead of long-term benefits,” she said.
“Many people say that after retiring at the age of 62, one would be able to live and receive pensions for 10 more years only. Therefore, it would be better to get lump sum benefits than wait until retirement age,” she said.
Pham Chi Tam, deputy chair of the HCM City Labor Federation, said under the current regulations, the workers who have paid social insurance premiums can get pensions. However, many people who have paid premiums for 18-19 years also want to stop working and get a lump sum at the age of 40-45.
If amending the regulations and reducing the period of paying social insurance premiums and keeping the age of retirement at 60-62 (for females and males, respectively), it will be highly possible that employees aged 34-40 will choose to get a lump sum instead of waiting until retirement age.
According to Tam, the draft of the amended social insurance law says workers who withdraw social insurance benefits will have to pay social insurance premiums for 20 more years to be able to enjoy pensions. However, many young people, when losing jobs, still choose a one-time social insurance withdrawal. Later, if they find job opportunities, they will work and continue to pay insurance premiums to get pensions when they are retired.
The fact that workers stop working, then get lump sum benefits, find new jobs and pay social insurance premiums for the second round (15 years, or 20 years, as shown in the draft amended law to be able to get pensions), will cause serious consequences to workers, enterprises and the State as well.
“The workers who get one-time withdrawal after paying insurance premiums for 15-20 years won’t have enough money to cover their basic needs. Meanwhile, enterprises won’t have enough workers to stabilize their production once their workers resign after paying social premiums for 14 years. Meanwhile, if the number of workers demanding lump sum benefits is very high, the social insurance fund will break down,” Tam warned.
Former Deputy Minister of Labor, War Invalids and Social Affairs Pham Minh Huan said that it would be the failure of the policy to let workers get lump sum benefits and then rejoin the labor market from the beginning.
He said in this case, the pension insurance will become insignificant and this will cause serious consequences to workers because they will not have a pension for old age.
He said that Vietnam needs to learn a lesson from Regime 176 in the past, which allowed workers to get lump sum benefits in one amount of money. This is a bitter lesson: when workers turned old, their lives were hard because they didn’t have pensions. To retain workers and persuade them to stay with the social insurance system, the policy on insurance premium payment needs to be reasonable.
Eight business associations said that the law should be amended in a way to create favorable conditions for employees to have an early retirement age.