Elderly people in Vietnam may face difficulties as the retirement pension fund is estimated to be empty by 2029.
Retirement pension fund is estimated to be empty by 2029
The advice was given by International Labour Organisation (ILO) in a report compiled at the request of the government.
According to ILO, only 20% labourers have social insurance in Vietnam. In 2009, only 9.3 million of 48.5 million people of working age contributed to the pension fund.
Even though Vietnam has a young population with the number of people in working age accounting for 58.5% of the workforce in 2010, the aging process has quickened the problem.
Carlos Galian, an ILO expert in Vietnam said that the fund will enter deficit in 2020 and will completely run out in 2029. This poses a major challenge to the economy.
Galian also said the current pension regime had many shortcomings. The mandatory retirement age is too young, especially for females. Some people are allowed to retire prematurely which also cause problems with average life expectancy rising and the birth rate declining.
Another urgent problem is the differential benefits between state employees and employees in the private sector.
"To have a good social insurance policy and a pension fund specifically, we need an assessment and forecast for the fund." said Pham Minh Huan, Deputy Minister of Labour, Invalids and Social Affairs.
Postponing the retirement age is considered one of the easiest solutions however, the ILO said it was not enough and Vietnam should revise its pension calculations in order to reduce funding shortfall.
Galian further said additional research should be done in order to protect workers who are informally employed.
In Vietnam, workers who sign a three month contract or longer may join the social insurance scheme. Officials at state businesses are included in compulsory social insurance programme and citizens between 15 to 55 (for women) and 60 (for men) can participate in the voluntary social insurance.