Vietnam Social Security states the reason why many people receive low pensions

The cases of low pension recipients mainly include those who retired from the Nghe An Farmers' Social Insurance Fund and switched to voluntary social insurance according to Decision 41/2009/QD-TTg dated March 16, 2009, of the Prime Minister; non-specialized commune officials; and those participating in voluntary social insurance who chose the lowest contribution level…

The lowest pensions were concentrated among farmers in Nghe An province who participated in the pilot program for social insurance contributions for farmers. By 2009, when the Nghe An farmers' social insurance system was converted to voluntary social insurance according to Decision 41/2009/QD-TTg, many continued to participate in the social security system through voluntary social insurance. Upon retirement, due to short contribution periods and low monthly contributions (at times as low as 10,000 VND/month), these individuals received low pensions.

In addition, part-time commune officials also belong to the group with low pensions. This group contributes to social insurance at only the basic salary level, and the period of social insurance contributions for pension benefits is short (from 15 to 20 years).

At the same time, according to regulations, upon retirement, if a person does not have 20 years or more of mandatory social insurance contributions (excluding the time spent contributing as a part-time worker in communes, wards, or towns), and their pension is lower than the basic salary, then the pension will not be supplemented to reach the basic salary level.

In 2021, the average pension for part-time commune officials was approximately 1.3 million VND per month.

For those participating in voluntary social insurance, the minimum monthly income used as the basis for social insurance contributions (chosen by the participant) is equal to the poverty line standard for rural areas, and the maximum is 20 times the basic salary at the time of contribution.

In reality, the majority of people choose an income level corresponding to the regional poverty line (before 2022, the rural poverty line was 700,000 VND, from 2022 it is 1,500,000 VND) to contribute to voluntary social insurance. In fact, the vast majority of those participating in voluntary social insurance only contribute until they have completed 20 years of contributions to meet the minimum time requirement to receive a pension.

Due to low social insurance contributions and short contribution periods, the average benefit for this group is low. In addition, many employees who are required to contribute to mandatory social insurance, but lack sufficient contribution time to qualify for a pension, have opted for low-level monthly or lump-sum voluntary contributions for the remaining period, resulting in lower pension benefits.

Many businesses are "circumventing the law" to pay social insurance for their employees.

For those participating in mandatory social insurance, many businesses "circumvent the law" by paying social insurance contributions for employees that do not reflect their actual wages and income. In some units, the income used as the basis for social insurance contributions is always at the lowest level, leading to low average benefits for employees upon retirement.

For example, a case where an employee contributes to social insurance at a low rate, resulting in a low pension, is the case of Ms. Nguyen Thi N. (born in 1962), who contributed to social insurance for 20 years and 3 months, with a pension entitlement rate of 61%. However, Ms. N. spent two-thirds of her social insurance contribution period with low wages (in many years, her social insurance contribution was only 300,000 - 400,000 VND/month...). Therefore, upon retirement (in May 2017), Ms. N. received a pension of 1,074,586 VND. After the pension adjustment according to Government Decree No. 108/2021/ND-CP, in June 2023, the amount of pension Ms. N. received increased to 1,600,300 VND.

The above situation shows that, although the percentage of pensioners receiving a pension is quite high (up to 75%), the low contribution rates, short social insurance contribution periods, the high number of early retirements by employees (especially those working outside the state sector), and the incorrect contribution rates based on actual wages and income at some employers... have resulted in many employees receiving a low average pension.

Currently, the Social Insurance Law stipulates that the salary used as the basis for social insurance contributions includes both salary and allowances. However, for certain employee benefits (support) provided by employers that are regular and stable, such as fuel allowances, telephone allowances, lunch allowances, housing allowances, etc., current law stipulates that these cannot be used as the basis for calculating social insurance contributions. Taking advantage of this regulation, some businesses circumvent the law by splitting these allowances into smaller support payments to evade or underpay social insurance contributions. Therefore, to ensure the legitimate rights of employees, Vietnam Social Insurance proposes that competent authorities study a plan to amend the salary used as the basis for social insurance contributions in the following way: for employees contributing to social insurance based on a salary determined by the employer, the salary used as the basis for social insurance contributions will be the monthly salary, including: basic salary, salary allowances, and other supplementary payments paid regularly in each pay period.

Furthermore, research is needed to harmonize the three types of income of employees and establish a legal basis for clearly defining employee income as the basis for social insurance contributions. This will avoid significant discrepancies between employee income used for tax settlement and actual income paid to employees, thereby ensuring the best possible benefits for employees upon retirement. However, this matter requires input from relevant sectors such as Finance, Labor, Justice, and the Vietnam General Confederation of Labor …

Given the situation where some employers pay social insurance contributions based on employees' actual income and salary, to ensure full benefits, employees should pay attention to the agreement on salary and social insurance contribution amount in the contract when signing an employment contract. They should also raise concerns with the employer if their social insurance contribution amount is lower than their actual salary or lower than the regional minimum wage. Furthermore, employees should regularly monitor and check their social insurance contribution and benefit history through various channels (such as the Vietnam Social Insurance Information Portal, the VssID-Social Insurance application, etc.) to stay informed about their employer's social insurance contributions and promptly report any instances of incomplete social insurance contributions by employers to the relevant authorities (if any).

Currently, more than 3.3 million people nationwide are receiving monthly pensions and social insurance benefits. To further improve the living standards of retirees, on June 29, 2023, the Government issued Decree No. 42/2023/ND-CP adjusting pensions, social insurance benefits, and monthly allowances.

Accordingly, pensions, social insurance benefits, and monthly allowances will be increased by 12.5% to 20.8% for beneficiaries. Those who retired and received pensions or monthly allowances before 1995, after the adjustment, if their income remains below 3 million VND/month, will receive an additional increase: those receiving less than 2.7 million VND/month will receive an increase of 300,000 VND/month; those receiving between 2.7 million and less than 3 million VND/month will receive an increase to 3 million VND/month.

This Decree takes effect from August 14, 2023; the provisions of this Decree shall be implemented from July 1, 2023.

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