The National Assembly's Social Affairs Committee deputy chairman Bui SiLoi spoke with the Thoi bao Ngan hang (Banking Times) about theGovernment's guarantee for the social insurance fund.
* Do you think there is a risk that the social insurance fund will break down?
The social insurance fund is a long-term policy. At the moment, thereis inequality between social insurance fees and pay levels. This meansthat people receive a lot of benefits while social insurance fees arevery low.
During the implementation process, it istrue that the fund can break down, even in developed countries. InVietnam, policies will be adjusted in order to minimise this risk. TheSocial Insurance Law will be revised in efforts to prevent futurebreakdowns. Despite many difficulties, the Government will guarantee theSocial Insurance Fund's continued existence and development.
* What measures are being taken to address the problem?
There are many ways to handle the problem. First, the fee (premium)levels should be adjusted. The Labour Code regulates that socialinsurance premiums are based on pay and allowances on labour or workingcontracts. For a long time, we paid premiums based on the minimum wage.
Second, we should increase the retirement agegradually. Currently labour supply is higher than demand, so theretirement age should be kept at 55 for women and 60 for men.
For the long term, we should have a plan for increasing the retirementage step by step in order to prepare for the trend of populationageing. The Government is drafting a bill on the revised SocialInsurance Law to submit to the National Assembly.
According to the draft, the retirement age will be increased by one yearevery two or three years, reaching 60 for both men and women when thecountry's population enters the ageing period. A long-term plan isneeded for the country to prepare skilled human resources and forpeople's awareness to change.
Third, insuranceparticipation should be expanded. At the moment, five people are payinginsurance premiums for each beneficiary compared to nine or 10 people in2011. In many countries, insurance funds are balanced between incomingand outgoing and we must strive for such a target.
In addition, the fund should be managed effectively in order to overcomethe impact of price escalation and currency devaluation. So fundsshould be invested in major projects that result in profits higher thanthe interest rate announced by the State Bank. The revised SocialInsurance Law will address these problems.
* Is there any risk from investing these funds?
Risks would come from bad investment and management. We used to investin banks with more than 50 percent of capital from the Government, butwe did not see higher profits and growth. Funds were usually stable fromGovernment owned banks with low profits. But for the long term, weshould invest in key infrastructure and transport projects that wouldensure the fund's stability.
Recently weexperimentally invested 1.6 trillion VND (76 million USD) in the LaiChau Hydro-Power Plant, a safe investment with high interest. In 2012,we gained profits higher than the State Bank's interest and escalationof prices index.
* This means that labourers and retired people should feel secure about the fund, right?
Vietnam currently has 2.6 million people paid by the social insurancefund, of which 1.9 million are retired. However, most of them retiredbefore January 1, 1995, and were paid by the State Budget. The number ofpeople who retired after beginning of 1995 was very modest.
We should increase the retirement pension for those living below theminimum living demand to a level equal to the minimum wage. People withhigh incomes paying high premiums would receive high retirementpensions.
Moreover, supplementary forms ofretirement insurance should be expanded, so enterprises with high incomewould buy others' insurance out of State insurance.
Labourers who worked overseas and bought social insurance could rejointhe social insurance fund when they returned to the country to get abigger retirement pension.-VNA
* Do you think there is a risk that the social insurance fund will break down?
The social insurance fund is a long-term policy. At the moment, thereis inequality between social insurance fees and pay levels. This meansthat people receive a lot of benefits while social insurance fees arevery low.
During the implementation process, it istrue that the fund can break down, even in developed countries. InVietnam, policies will be adjusted in order to minimise this risk. TheSocial Insurance Law will be revised in efforts to prevent futurebreakdowns. Despite many difficulties, the Government will guarantee theSocial Insurance Fund's continued existence and development.
* What measures are being taken to address the problem?
There are many ways to handle the problem. First, the fee (premium)levels should be adjusted. The Labour Code regulates that socialinsurance premiums are based on pay and allowances on labour or workingcontracts. For a long time, we paid premiums based on the minimum wage.
Second, we should increase the retirement agegradually. Currently labour supply is higher than demand, so theretirement age should be kept at 55 for women and 60 for men.
For the long term, we should have a plan for increasing the retirementage step by step in order to prepare for the trend of populationageing. The Government is drafting a bill on the revised SocialInsurance Law to submit to the National Assembly.
According to the draft, the retirement age will be increased by one yearevery two or three years, reaching 60 for both men and women when thecountry's population enters the ageing period. A long-term plan isneeded for the country to prepare skilled human resources and forpeople's awareness to change.
Third, insuranceparticipation should be expanded. At the moment, five people are payinginsurance premiums for each beneficiary compared to nine or 10 people in2011. In many countries, insurance funds are balanced between incomingand outgoing and we must strive for such a target.
In addition, the fund should be managed effectively in order to overcomethe impact of price escalation and currency devaluation. So fundsshould be invested in major projects that result in profits higher thanthe interest rate announced by the State Bank. The revised SocialInsurance Law will address these problems.
* Is there any risk from investing these funds?
Risks would come from bad investment and management. We used to investin banks with more than 50 percent of capital from the Government, butwe did not see higher profits and growth. Funds were usually stable fromGovernment owned banks with low profits. But for the long term, weshould invest in key infrastructure and transport projects that wouldensure the fund's stability.
Recently weexperimentally invested 1.6 trillion VND (76 million USD) in the LaiChau Hydro-Power Plant, a safe investment with high interest. In 2012,we gained profits higher than the State Bank's interest and escalationof prices index.
* This means that labourers and retired people should feel secure about the fund, right?
Vietnam currently has 2.6 million people paid by the social insurancefund, of which 1.9 million are retired. However, most of them retiredbefore January 1, 1995, and were paid by the State Budget. The number ofpeople who retired after beginning of 1995 was very modest.
We should increase the retirement pension for those living below theminimum living demand to a level equal to the minimum wage. People withhigh incomes paying high premiums would receive high retirementpensions.
Moreover, supplementary forms ofretirement insurance should be expanded, so enterprises with high incomewould buy others' insurance out of State insurance.
Labourers who worked overseas and bought social insurance could rejointhe social insurance fund when they returned to the country to get abigger retirement pension.-VNA
