Having retired from her job as a nurse at the age of 55, Ms. Ngoc Chau still offers a private service - baby baths - and has also opened a small convenience store. Her retirement pension and savings provide her with a good standard of living and she does not need to work any longer. But she does, as her health is still good and she wants to do something useful. 

Like Ms. Chau, many other retirees around 55-60 years old are able to continue contributing to society but aren’t officially allowed to do so under existing law. Recently, the Ministry of Labor, War Invalids and Social Affairs (MoLISA) proposed raising the retirement age, but opposite to expectations it was met with a mixed reaction. 

One stone kills two birds

Plans to raise the retirement age have been floated a few times since 2012 but been rejected. It was recently proposed again, increasing from 60 to 62 for men and 55 to 60 for women, starting from 2021. 

Workers in certain positions, such as technical professions or in management, can retire later, but no more than five years, to 67 years old for men and 65 for women. 

Higher average life expectancy among Vietnamese people is the main factor behind calls for change, according to Mr. Ha Dinh Bon, Head of the Legislation Department at MoLISA, which drafted the recent proposal. 

In the 1960s, the average life expectancy for Vietnamese people was 60 years. 

In recent times, it has increased to 75.6, putting the country second in ASEAN behind Singapore (82.6). The retirement age, however, is the same as it was in 1961. 

“Life expectancy increases in the context of improved working and living conditions and healthcare services,” he said. 

“Under the current retirement age, people may live for 20 more years on average and many are still able to work.” 

Moreover, Vietnam is in the middle of a “golden population structure”. But it is also beginning to age. 

About 70 per cent of its 90 million people are of working age, according to the World Bank, which shows that Vietnam is aging at one of the world’s fastest rates and at a much lower income level than other countries showing a similar trend. According to the latest figures from MoLISA, the ratio of elderly Vietnamese is increasi

ng quickly, from 6.9 per cent of the population in 1979 to 10.5 per cent now. By 2050, there will be about 10 million elderly citizens in the country. 

Therefore, raising the retirement age will not only provide jobs to those who can still work but will also effectively use experienced workers to meet demand in the years to come. 

Longer life expectancy is also predicted to disturb the balance in social insurance funds by 2050. 

Each Vietnamese worker currently pays 22 per cent of their monthly salary to a social insurance fund and receives 75 per cent of their salary as a pension upon retirement. 

However, if a worker pays social insurance for 30 years, their contribution will only be sufficient to pay him or her for about ten years, while many people will live for 20 years more after exiting the workforce. 

On the other hand, the number of people buying social insurance is actually falling, according to Vietnam Social Insurance (VSI). 

There were 217 people contributing to one retirement pension in 1996, which fell to 34 in 2000, eleven in 2009, and nine in 2016. 

About 13 million workers are paying compulsory social insurance and 200,000 voluntarily pay. 

But the workforce will total about 60 million by 2020. VSI targets having 50 per cent of the workforce paying social insurance in 2020. 

But increasing those paying social insurance from 13.2 million to 30 million presents a major challenge. 

VSI argues that existing policies discourage workers from contributing to social insurance funds until their legal retirement age approaches and puts extra pressure on the fund to cover early retirees. Social insurance will clearly break down at some point. 

Mr. Pham Luong Son, VSI’s Deputy Director, said there were three solutions to deal with the issue: increasing social insurance payments, cutting the pension, or raising the retirement age. 

The first two are virtually impossible, because Vietnam’s social insurance fees are already among the world’s highest and average incomes are low. 

In the circumstances, raising the retirement age seems to be the best option, killing two birds with one stone. 

It is also a global trend, as many other countries have higher retirement ages than Vietnam, such as 62 in Singapore, France and Japan, 65 in Germany, the UK and Australia, and 67 in the US. 

May more birds be unexpectedly killed?

Supporting the proposal, Mr. Dam Huu Dac, Deputy Director of the Vietnam Association of the Elderly, said that many women aged 55 and men aged 60 are still of sound mind and good health. 

It is therefore a waste of resources when they are forced to retire at this age while the population is aging. 

Many workers, however, disagree. Like 53-year-old Quynh Nga, who works at a textile factory, who said she is counting down the days until she turns 55 and can retire, because her job is hard. 

“I don’t want to wait until I’m 60,” she said. “I’m usually exhausted after work. I even want to retire now, but must continue working so I pay enough insurance to meet the requirements for receiving a retirement pension.” 

The proposal to raise the retirement age makes allowances for people such as Ms. Nga. 

Those who work in hard manual jobs or in dangerous or noxious environments, such as textiles, leather shoe making, rubber production, and construction, will still be subject to the existing retirement age if they so desire. 

The main goal of increasing the retirement age is to lengthen the time social insurance payments are made and cut the time pensions are paid. 

But many people don’t want to work longer, invest more in what they see as unstable social insurance funds, and receive the pension at a later age.  

Young people are also reluctant to see the retirement age extended. According to a recent survey by HSBC on more than 18,000 people in 16 countries, including Vietnam, young people plan to retire at 59, earlier than previous generations. Only 10 per cent want to continue working after 65. 

About 65 per cent of respondents are concerned that the shrinking social insurance fund will affect their future pensions, and some 24 per cent believe there will be no pension for them when the time comes to retire. 

They prefer to deposit money in bank accounts to save for their retirement and invest in real estate, which seems to bring the best profit, according to 47 per cent of respondents. 

Others would invest in the stock market, government or corporate bonds, and private pension plans. 

There are also concerns that raising the retirement age will impact on job opportunities and promotions for young workers and increase the unemployment rate. 

Disagreeing, Mr. Bon said the unemployment rate among young graduates is high already and increasing, so such concerns relate more to training and job choice. 

He also believes that only talented and experienced elderly workers can have senior positions.

“Young people need to more active, and the opportunities for promotion will come,” he said.  

But the Legislation Department at MoLISA is also considering age limits on senior positions, to increase the chances of young people earning promotions. 

This would also be a good way to identify talented workers for important positions. 

VN Economic Times