If you work for a company or organization, there is a program that any employee in Vietnam is required to participate in, which is the retirement system. The retirement system in Vietnam will include three types of insurance, which are social insurance , unemployment insurance and health insurance .
Self-employed people (i.e. those who do not work for a company) can also participate in this pension scheme by paying insurance premiums voluntarily.
If you work for a company and have a labor contract, every month, the company will deduct 10.5% of your income (including 8% for social insurance, 1% for unemployment insurance and 1.5% for health insurance) and deduct 21% from the company (including 8% for social insurance, 1% for unemployment insurance and 3% for health insurance) to pay these types of insurance for you.
If you pay regularly every month, when you reach retirement age, you will have a certain amount to use for your retirement.
Figure 1: Payment mechanism of insurance types in Vietnam
Assuming your income is 30,000,000 VND /month, you have to deduct 10.5% (3,150,000 VND ) to pay insurance, which means your salary will be 30,000,000 VND but you will only receive 30,000,000 VND – 3,150,000 VND = 26,850,000 VND .
The company will pay a total of 21% (6,450,000 VND ) for you, this amount is paid by the company and will not be deducted from your income. In short, your social insurance book will record the insurance contribution level, specifically the “salary for fund contribution” will be the number 30 million, this is the number that you will use as a basis for when you reach retirement age, you will withdraw and use.
Figure 2: A separate sheet of a social insurance book, showing the insurance contribution level (“salary contribution”)
The above is just an example. In reality, the maximum income used to calculate social insurance will not exceed 20 times the basic salary (1,490,000 VND ), which is no more than 29,800,000 VND .
So how will the State calculate social insurance (SI) for you?
First, the State will take the milestone, which is 20 years of working for men and 15 years of working for women. In this case, I will take the milestone of 20 years of working for men as an example.
Suppose in 2000, I just turned 18 years old, the age to sign a labor contract according to the law, I worked continuously for 20 years.
That means by 2020 I will be eligible to receive a pension , and the pension I will receive at this time (according to the provisions of the social insurance law) will be 45% of the average salary during the working period ( note that this salary is the salary shown on the labor contract ).
And then, for every year you work and continue to pay social insurance, you will get an additional 2% / year. This number will continue to increase until it reaches a maximum of 75%, then it stops.
For example, in 2020, I have 45%, continue to work and pay until 2030, that is, for another 10 years, I will receive an additional 2% x 10 years, which is 20% more, in total I will receive 65%. Similarly, until 2035, when I am 53 years old, I will receive a total of 75%. And then, if I continue to work and pay social insurance, that percentage will not increase anymore.
At this point, many of you will think, “So when I am 53 years old and have reached 75%, I will retire early, why should I pay more?” . At this point, the retirement age policy will be applied, and specifically the retirement age will be 60 for men and 55 for women. In this case, I will use the number 60 for men as an example.
For every year you retire before age 60, your benefit will be reduced by 2%. For example, in 2035, when you retire at age 53, you will not receive 75% of your average salary.
Because I retired 7 years earlier than my retirement age, I was deducted 2% x 7 which is 14%, which means I only receive 75% – 14% = 61% of my average salary, not 75%.
Similarly, the earlier you retire compared to the retirement age of 60, the more you will be deducted (for example, if you retire in 2030, which means you are 48 years old, 13 years before retirement age, you will only receive 75% – 26% = 39%, not 65% as initially calculated).
However, if you retire early, in the first 20 years, that is, during the period when you are not yet eligible for a pension, you will receive a lump sum benefit, and the amount you receive will be = the amount received each year x the number of years of insurance contributions .
Figure 3: Overview of how social insurance is calculated in Vietnam
Above is a brief overview of how to calculate social insurance in Vietnam, I have rewritten it in the most understandable way so that you can calculate it yourself. In fact, the calculation of insurance types and insurance regulations in our country are quite complicated.
Nowadays, insurance agencies have also digitized their work. You just need to download their apps, enter your monthly salary and number of years of work and they can calculate it for you, very convenient.
Thank you for reading my sharing, hopefully it has brought more or less useful value to you.
- Sky -