Viet Nam
Viet Nam: Pension system in 2016
Viet Nam Social Security (VSS) manages and administers social security contributions and benefits (including pensions) for both private sector workers and government workers. The current pension scheme is a pay-as-you-go defined benefit (PAYG DB) scheme.
Qualifying conditions
Normal pension age is 60 for men and 55 for women with a minimum of 20 years of contributions. A lump sum payment is made for people with shorter contribution periods.
Benefit calculation
Earnings-related
For the first 15 years of contribution, the pension accrual rate is 3% for both males and females, and then is 2% for males and 3% for females for each additional year. Between 2018 and 2022 the number of years will increase to 20 for men and from 2018 the additional accrual for women will be lowered to 2%. The maximum replacement rate is 75% of the insured’s average earnings.
Old-age grant
If total contributions are less than 20 years, retirees receive a lump sum is paid of 1.5 times the insured’s covered average monthly earnings in the last five years for years of contributions before 2014, plus 2 times the insured’s covered average monthly earnings in the last five years for contributions since 2014.
Old-age social assistance
According to the Decree 136/2013/NĐ-CP dated 21 October 2013, a minimum social pension is VND 270 000. A multiplier is applied with this minimum level: (i) 1.5 (or benefit is VND 405 000) for those aged 60 to 79 who are living in poor households without family members, or with support from family members who are also receiving social assistance benefits; (ii) 2 (or benefit is VND 540 000) for those aged 80 and over who are living in poor households without family members, or with support from family members who are also receiving social assistance benefits; and 1 (or benefit is VND 270 000) for those aged 80 and over who do not have any social insurance and assistance benefits; and (iii) 3 (or benefit is VND 810 000) for any older people who are living in poor households without family members but receiving support from community.
Variant careers
Early retirement
It is possible to retire and to start claiming the pension at age 55 for men and 50 for women under specific requirements. The pension is reduced by 2% of the insured’s covered average monthly earnings for each year the pension is taken before the insured’s normal pensionable age due to reduced working capacity.
Late retirement
It is not possible to start claiming a pension after the normal pension age. It is possible, however, to combine working and receiving pension.
Personal income tax and social security contributions
Taxation of workers
There is a personal allowance of VND 9 million per month.
Taxation of worker’s income
Tax rates applicable to regular annual income are as follows:
Social security contributions payable by workers
Employees pay 8% of monthly salary/wage for retirement benefits. The minimum and maximum monthly earnings for contribution and benefit calculation purposes are the minimum wage and 20 times of the minimum wage, respectively. As such, for 1 July 2017 – 1 July 2018, they are VND 1 300 000 and VND 26 000 000, respectively; and for 1 July 2018 onwards they will be VND 1 390 000 and VND 27 800 000, respectively.
Taxation of pensioners
There is no additional tax relief for pensioners.
Taxation of pension income
The same taxation rule is applied to pension benefits.
Social security contributions payable by pensioners
Pensioners do not pay any social security contributions.
Assumptions: Real rate of return 3%, real earnings growth 1.25%, inflation 2%, and real discount rate 2%. All systems are modelled and indexed according to what is legislated. Transitional rules apply where relevant. DC conversion rate equal 90%. Labour market entry occurs at age 20 in 2016. Tax system latest available: 2016.