Voluntary pension is becoming necessary in Vietnam to ensure social security as the country’s population age, participants said at a conference on April 24 in Hanoi.
The Ministry of Finance held the conference so that relevant authorities could learn about other countries’ experiences with voluntary pension, such as UK , Japan and China.
At the conference, the ministry also introduced a draft circular on the voluntary pension fund and asked for public feedback
Vietnam has a population of more than 87 million, including more than 50 million of working age. While the country is currently entering what’s termed a “golden population structure”, this will inevitably shift into an ageing period.
This will increase the need for voluntary pension in addition to mandatory public pension, especially as the living standard and longevity of Vietnamese people improve, according to the Insurance Supervisory Authority.
There are two kinds of pension schemes currently used in the world: policy-based and trust-based scheme. The policy-based, in which insurance enterprises design and provide insurance products to consumers, is more appropriate for Vietnam because it would be less complicated and les risky, the department said
An expert from Prudential said the high employment rate in Vietnam (about 82 percent) together with the country’s increasing productivity ensured that people would be able to prepare and invest for retirement.
However, he added that coordination among the Government, employers and insurance companies is critical for the development of pension funds. Insurance enterprises should also diversify product and services to meet customers’ needs.
According to Desmond Chan, director of the Pension Strategy – Group Corporate Solution of AIA Group, experience from overseas markets showed that appropriate tax incentives have to be provided to both employers and members to encourage them to enroll for long periods
The pension assets should also be put under tight management, he said, to prevent them from being used for inappropriate purposes which could trigger the collapse of the fund.
Experts at the conference urged that voluntary pension be implemented as soon as possible: “The earlier you start, the better it is for everyone.”
Under the draft circular, only insurance enterprises with equity of more than 1 trillion VND (47.62 million USD) would be allowed to implement this type of insurance and must contribute more than 200 billion VND (9.5 million USD) to the pension fund without withdrawal to ensure their responsibility, the department said
The pension fund would be separated from other investment funds belonging to insurance enterprises to ensure its efficiency.
The funds would be invested in deposits at credit institutions, Government bonds and enterprises’ bonds. The money could not be invested in real estate, gold or securities of stock and financial companies.
Workers’ contributions to the voluntary pension fund would be exempted from personal income tax (PIT). The insurance fee exempted from PIT is expected to be 1 million VND (49.50 USD) per month.
In addition, the contribution of employers would also be reflect in their income taxes, according to the draft circular.-VNA
The Ministry of Finance held the conference so that relevant authorities could learn about other countries’ experiences with voluntary pension, such as UK , Japan and China.
At the conference, the ministry also introduced a draft circular on the voluntary pension fund and asked for public feedback
Vietnam has a population of more than 87 million, including more than 50 million of working age. While the country is currently entering what’s termed a “golden population structure”, this will inevitably shift into an ageing period.
This will increase the need for voluntary pension in addition to mandatory public pension, especially as the living standard and longevity of Vietnamese people improve, according to the Insurance Supervisory Authority.
There are two kinds of pension schemes currently used in the world: policy-based and trust-based scheme. The policy-based, in which insurance enterprises design and provide insurance products to consumers, is more appropriate for Vietnam because it would be less complicated and les risky, the department said
An expert from Prudential said the high employment rate in Vietnam (about 82 percent) together with the country’s increasing productivity ensured that people would be able to prepare and invest for retirement.
However, he added that coordination among the Government, employers and insurance companies is critical for the development of pension funds. Insurance enterprises should also diversify product and services to meet customers’ needs.
According to Desmond Chan, director of the Pension Strategy – Group Corporate Solution of AIA Group, experience from overseas markets showed that appropriate tax incentives have to be provided to both employers and members to encourage them to enroll for long periods
The pension assets should also be put under tight management, he said, to prevent them from being used for inappropriate purposes which could trigger the collapse of the fund.
Experts at the conference urged that voluntary pension be implemented as soon as possible: “The earlier you start, the better it is for everyone.”
Under the draft circular, only insurance enterprises with equity of more than 1 trillion VND (47.62 million USD) would be allowed to implement this type of insurance and must contribute more than 200 billion VND (9.5 million USD) to the pension fund without withdrawal to ensure their responsibility, the department said
The pension fund would be separated from other investment funds belonging to insurance enterprises to ensure its efficiency.
The funds would be invested in deposits at credit institutions, Government bonds and enterprises’ bonds. The money could not be invested in real estate, gold or securities of stock and financial companies.
Workers’ contributions to the voluntary pension fund would be exempted from personal income tax (PIT). The insurance fee exempted from PIT is expected to be 1 million VND (49.50 USD) per month.
In addition, the contribution of employers would also be reflect in their income taxes, according to the draft circular.-VNA
