Will the pension calculation change when the basic salary is abolished from July 1, 2024?

When implementing salary reform from July 1, 2024, it will also be the time to abolish the basic salary. So will the pension calculation change when the basic salary is abolished?

Will the pension calculation change when the basic salary is eliminated from July 1, 2024?

The pension calculation method is applied according to Article 56 of the Law on Social Insurance 2014 and Article 7 of Decree 115/2015/ND-CP as follows:

Monthly pension = Monthly benefit rate x Average monthly salary for social insurance contribution

The monthly pension rate for male workers who have paid 20 years of social insurance is 45%. After that, for each additional year of social insurance payment, the rate will increase by 2%. For female workers who have paid 15 years of social insurance, the rate is 45%, after that, for each additional year of social insurance payment, the rate will increase by 2%. The maximum benefit level is 75%.

The average monthly income for social insurance contribution is calculated by averaging the monthly income for social insurance contribution of the entire contribution period.

Employees who have paid social insurance for more than the number of years corresponding to the pension rate of 75%, when retiring, in addition to the pension, employees will also receive a one-time allowance.

Thus, if salary reform is implemented according to Resolution 27/NQ-TW from July 1, 2024 as planned, the pension calculation formula may not change.

However, Article 56 and Article 71 of the 2014 Law on Social Insurance stipulate that the lowest pension level when participating in compulsory social insurance is equal to the basic salary.

Currently, the basic salary is 1,800,000 VND, so the lowest pension is 1,800,000 VND/month.

Therefore, when removing the basic salary, there needs to be guidance to determine the lowest pension level.

Example of pension calculation: Male employee pays compulsory social insurance for 30 years, retires in November 2023 at the age of 60 years and 9 months, the average monthly salary for social insurance payment is 3.5 million VND/month, how much is the monthly pension?

The mandatory social insurance payment period is 30 years, corresponding to a pension rate of 65%. Thus, the monthly pension will be equal to 3,500,000 VND x 65% = 2,275,000 VND/month.

**According to the Minister of Finance, with the expected revenue and expenditure of the 2024 budget, along with the use of part of the accumulated salary reform source of the central budget and local budget sources, it is expected to ensure sufficient implementation of synchronous salary policy reform according to Resolution 27, while increasing pensions from July 1, 2024.

Will pensions increase when salary reform is implemented?

According to Resolution 27/NQ-TW, the new salary system based on job position, title and leadership position replaces the current salary system; converts old salary to new salary, ensuring that it is not lower than current salary.

When reforming salaries, the social insurance contribution salary of civil servants and public employees also changes.

According to the pension calculation formula stated: The pension level is calculated from the average monthly salary for social insurance contributions and the pension rate.

So when the average monthly salary for social insurance contribution increases, the pension will also increase.

How much will the retirement age of workers increase in 2024?

Article 169 of the 2019 Labor Code stipulates the retirement age of employees as follows:

Employees who ensure the conditions on social insurance payment period according to the provisions of the law on social insurance are entitled to receive pension when reaching retirement age.

The retirement age of employees in normal working conditions is adjusted according to the roadmap until reaching 62 years old for male employees in 2028 and 60 years old for female employees in 2035.

From 2021, the retirement age of employees in normal working conditions is 60 years and 3 months for male employees and 55 years and 4 months for female employees; then, each year it increases by 3 months for male employees and 4 months for female employees.

Workers with reduced working capacity; working in particularly arduous, toxic, or dangerous occupations or jobs; working in areas with particularly difficult socio-economic conditions may retire at a lower age but not more than 5 years, unless otherwise provided by law. Workers with high professional and technical qualifications and some special cases may retire at a higher age but not more than 5 years, unless otherwise provided by law.

Thus, the retirement age in 2024 for male workers under normal conditions is 61 years old; for female workers under normal conditions it is 56 years and 4 months.

Source: https://baoquocte.vn/cach-tinh-luong-huu-co-thay-doi-khi-bo-luong-co-so-tu-ngay-0172024-252073.html