Mr. PPNT in Ho Chi Minh City is currently the person with the highest pension in the country. After the pension is adjusted to increase by 15% from July 1, 2024, his pension will increase from 124 million to 140 million VND/month.

Mr. PPNT's current pension is 60 times higher than that of a pensioner receiving the basic salary of 2.34 million VND/month.

The reason why Mr. PPNT's pension is high is because before 2007, when the salary was the basis for social insurance contributions based on actual salary (not subject to the ceiling limit as per current regulations), Mr. T's average social insurance contribution was at times more than 200 million VND/month, so his pension was calculated to be that high.

Buddhist monk (12).jpg Photo by Chi Hieu
Pensions are continuously adjusted to ensure a standard of living for workers in their old age. Illustration: Chi Hieu.

Since the Social Insurance Law 2006 took effect, stipulating the maximum monthly salary ceiling for compulsory social insurance contributions equal to 20 months of basic salary, the possibility of compulsory social insurance contributors receiving pensions of hundreds of millions of dong per month is no longer possible.

Specifically, the current basic salary is 2.34 million VND, with the maximum contribution level equal to 20 months of the basic salary, the highest contribution level is only 46.8 million VND per month. Thus, in the case of employees paying social insurance at the highest level until reaching retirement age, ensuring the social insurance payment period to receive the maximum level of 75% of the pension (female employees pay for 30 years, male employees pay for 35 years), there will be no one receiving a pension that is too different from those receiving a low pension.

Calculating pension based on the entire period of social insurance payment is appropriate.

According to Vietnam Social Security, the regulation on the salary ceiling for social insurance contributions being 20 times the basic salary will create a common ground with not too large a gap between pensioners; if participating at the maximum level for a long time, a high pension will still be guaranteed.

Along with adjusting the social insurance contribution ceiling to no more than 20 times the basic salary, adjusting the pension calculation method (from the average of the last 5 years to the entire social insurance contribution period) is consistent with the salary reform policy and ensures the rights of employees.

In particular, with the increase in the salary level in the State sector, calculating the whole process according to the new Social Insurance Law 2024 is appropriate.

The regulation that the pension level is calculated based on the pension rate and the average salary used as the basis for social insurance contributions during the entire contribution period is consistent with the principle of contribution and benefit.

Consecutive pensions are adjusted

With pensions continuing to be adjusted based on the increase in the consumer price index, in line with the capacity of the State budget and the Social Insurance Fund, pensions will ensure a standard of living for workers when they retire.

From 1995 to 2023, Vietnam has adjusted pensions 23 times. After many adjustments, the pension of retirees has increased from 21 to 26 times compared to the pension level in 1995.

From July 1, 2024, the Government has adjusted the increase by 15% on pension, social insurance allowance, and monthly allowance of June 2024 for pensioners and allowance recipients.

This adjustment level is nearly twice the average increase in the period 2013-2023, much higher than the total increase in the consumer price index and economic growth. In 2023, the increase in the consumer price index is 3.25%, economic growth is 5.05%, estimated CPI in 2024 is from 4% - 4.5%, GDP is from 6% - 6.5%.

This is the Government's effort to balance resources, to improve pension levels, social insurance benefits, and monthly allowances, on the basis of being consistent with the balancing capacity of the Social Insurance Fund.