How to calculate pension when removing basic salary

Pensions will be adjusted from July 1, 2024 (Illustration: Ho Chi Minh City Social Insurance).

According to current regulations, employees who have participated in compulsory social insurance for 20 years or more and are of retirement age are entitled to receive a monthly pension.

Currently, the pension level for compulsory social insurance participants is regulated in Article 56 of the Social Insurance Law 2014.

Accordingly, the monthly pension of retired employees is equal to the benefit rate multiplied by the average monthly salary participating in social insurance.

In which, the lowest pension rate is 45% corresponding to 20 years of social insurance contribution for male workers, 15 years of social insurance contribution for female workers.

After that, for each additional year of social insurance payment, an additional 2% will be calculated up to a maximum of 75%.

The average monthly salary for social insurance contribution to calculate pension is stipulated in Article 62 of the Social Insurance Law 2014, with 3 calculation methods applied to 3 different groups.

The first group is the group of employees who have paid social insurance for the entire period according to the salary regime prescribed by the State. The average monthly salary for social insurance payment of this group is calculated according to the time of participating in social insurance.

The second group is the group of employees who have paid social insurance for the entire period of time according to the salary regime decided by the employer. The average monthly salary for social insurance payment of this group is calculated for the entire period of social insurance participation.

The third group is the group of employees who have both a period of social insurance payment subject to the salary regime prescribed by the State and a period of social insurance payment subject to the salary regime decided by the employer.

Thus, the current pension calculation formula is not related to the basic salary, so abolishing the basic salary will not affect the pension calculation.

However, when thoroughly reforming the salary regime from July 1, 2024, the salaries of cadres, civil servants, public employees, and workers paid by the budget will not be based on the coefficient system multiplied by the basic salary but will be calculated according to the job position, ensuring that it is higher than the current basic salary.

At that time, the monthly salary used as the basis for social insurance contributions of employees with salary regimes prescribed by the State after July 1, 2024 will increase compared to the monthly salary used as the basis for social insurance contributions before July 1, 2024.

When the monthly salary used as the basis for social insurance contributions increases, the average monthly salary used for social insurance contributions of the group retiring after July 1, 2024 will certainly be higher than that of the group retiring before July 1, 2024, leading to higher pensions.

To ensure fairness between retirees before and after the salary reform, at the 31st session of the National Assembly Standing Committee on March 15, Minister of Labor, War Invalids and Social Affairs Dao Ngoc Dung said the Ministry has studied pension adjustments from July 1.

The adjustment level will be calculated reasonably to ensure the goal of ensuring harmony between people in the same position retiring before and after July 1, 2024. In particular, those who retired before 1995 will have a special policy to push their pensions even higher.

Source: https://dantri.com.vn/an-sinh/cach-tinh-luong-huu-khi-bo-luong-co-so-20240523053626894.htm