Filling the gap in social insurance coverage

According to the World Bank, although Vietnam has achieved impressive growth in recent years, the social security system in Vietnam is also facing difficulties as the rate of informal sector workers participating in voluntary social insurance is still low. The proportion of elderly people in Vietnam will increase to 15% of the population by 2035 and if the majority are not covered by the social insurance system, it will pose great challenges for social security.

World Bank (WB) experts share the challenges of population aging for the social security system.

At the workshop “Implementing social insurance policies: International experiences and implications for Vietnam”, organized by Vietnam Social Security in collaboration with the World Bank, representatives of international organizations shared experiences in effectively implementing social policies, the role of the social security system in solving the problems of population aging, informal sector labor, solutions to expand social insurance coverage and made some recommendations for Vietnam to effectively implement the Law on Social Insurance (amended).

Social Insurance Law (amended) towards international practices

At the workshop, the Director of Social Security and Employment for the Asia-Pacific region (World Bank), Mr. Yasser El.Gammal, congratulated the Vietnamese National Assembly on the passage of the Law on Social Insurance (amended) and said that this was truly an achievement, as it demonstrated Vietnam's strong commitment to continue to strengthen and expand the social insurance system, in line with the vision set forth in Resolution No. 28-NQ/TW of the 7th Conference of the Central Committee of the Communist Party of Vietnam, 12th tenure, dated May 28, 2018 (Resolution No. 28) on reforming social insurance policies. Accordingly, the Law on Social Insurance (amended) brought about significant progress in key areas such as: pension regime, social insurance coverage, one-time social insurance benefits, increased coverage and social security benefits. The passage of the Law on Social Insurance has contributed to bringing the implementation of social insurance policies as well as social security issues towards international standards and practices.

According to Mr. Yasser, although Vietnam has had impressive growth in recent years, the rate of labor in the informal sector remains high. About 76% of the total workforce still works in the informal sector and of those 1.9 million informal workers, only 5% will participate in voluntary social insurance by 2023.

Vietnam is at a demographic tipping point, with the fastest rate of population aging ever seen globally. The proportion of older people in the population (65 years and over) will increase from 7% to 15% by 2035. This poses major challenges for the social insurance system if a large proportion of them are not covered by the safety net. “Recognizing these challenges, the Vietnamese Government has taken positive policy initiatives in recent times. The retirement age has recently begun to gradually increase. Reforms to the social insurance system to make it more financially sustainable and expand coverage are clearly reflected in Resolution No. 28.

According to Mr. Yasser El.Gammal, the strong reforms applied in the recently passed Law on Social Insurance (amended) can contribute to addressing the gap in coverage of both contributions and pensions. However, achieving the target of 60% contribution by 2030 as set out in Resolution No. 28-NQ/TW is still difficult, which requires reforms and improvements in the implementation of social insurance policies in Vietnam.

Filling the social security gap in the informal labor sector

Deputy Head of the Tax and Card Management Department (Vietnam Social Security) Dinh Duy Hung said that after more than 15 years of implementation, the voluntary social insurance policy in Vietnam has come into effect. Accordingly, by 2020, the number of people participating in voluntary social insurance reached 1,124,548 people, nearly double that of 2019. However, due to the impact of the Covid-19 pandemic, from 2021, the growth rate of voluntary social insurance tends to slow down, when the whole country has 1,449,820 participants, an increase of only 29% compared to 2020.

According to Mr. Hung, the Law on Social Insurance (amended) recently passed by the National Assembly has overcome the shortcomings of the previous policy. At the same time, the insurance industry has also had many solutions to expand social insurance coverage in the informal sector such as: Strengthening coordination with ministries and branches to communicate policies to the majority of people; perfecting the members of the steering committee for implementing social insurance and health insurance policies at all levels; assigning specific tasks and tasks, and at the same time attaching responsibility for implementation to each member...

World Bank Chief Economist Robert Palacios shared his perspective on the impact of population aging and informality in Asia on social security and lessons for Vietnam. Accordingly, Southeast Asia is experiencing an unprecedented rate of population aging. Along with population aging, the number of working-age workers is decreasing and aging before reaching high income levels. Faced with the above situation, Mr. Robert Palacios said that in order to ensure social security for workers in the informal sector, policy makers need to develop solutions to promote voluntary pensions, expand social pensions, increase the coverage of voluntary social insurance, and develop mechanisms to encourage people to participate in the social security system.

Sharing the success of addressing blind spots in Korea's national pension coverage, Dr. Hyunpo Moon, a World Bank consultant, said: Initially, the Korean National Pension Service only covered full-time workers, then it was continuously expanded to cover workplaces with five or more full-time workers, farmers and fishermen, urban residents, and workplaces with one or more workers; and now it has become a pension program for the entire population.

By gradually expanding each target group, by 2020, the number of people covered by the National Pension Scheme (NPS) accounted for 72.2% of the total population aged 18-59. To narrow the coverage gap, the Korean government has provided contribution subsidies to target groups of workers since 2012.

Deputy General Director of Vietnam Social Security Le Hung Son assessed: The discussions and comments of international organizations and experts are all of practical value to Vietnam Social Security in organizing the implementation of social insurance policies in particular and the social security system in general. From research and lessons learned from the world, Vietnam Social Security has more solutions and plans to further develop the social insurance system; at the same time, there are specific scenarios to respond to difficulties and challenges in the coming time.

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