Supplementary pension scheme ready for pilot

Vietnam dragged its heels on providing a legal framework for supplementary pensions

“The basic pension in Vietnam is still low and pensioners at large don’t get enough,”  said Deputy Minister of Labour, Invalids and Social Affairs Pham Minh Huan.

“Quite a few pensioners receive just one million dong per month or about $50,” Huan told a workshop last week in Ho Chi Minh City to discuss a draft decree for the  pilot plan.

The supplementary pension scheme is part of the existing social insurance programme, and could be compulsory or voluntary, Huan explained.  The scheme could be structured as a defined contribution and administered through an individual pension account system, he said.

“The main objective of this project is to implement the pilot plan and form a legal framework for the establishment of a multi-tier pension system to supplement the existing fundamental social insurance programme in Vietnam,” Huan said.

 “With this supplementary pension scheme, employees will have better support and means to save for their retirement, diversifying sources for their pensions, making them more able to contribute, and lessening the pressure for related spending from the state budget and existing social insurance fund.”

Pham Truong Giang, deputy chief of the Social Insurance Bureau under the Ministry of Labour, Invalids and Social Affairs, said he would submit the draft decree to the prime minister this November, expecting it to be carried out next January.

Giang added the ministry planned to implement the scheme on a trial basis for three to five years, and then, together with other state agencies, would make an overall review before expanding it to include a wider range of employers.

He said that Unilever Vietnam in 2006 launched its own supplementary pension programme for its staff in the absence of a sufficiently defined legal framework. Giang added that among the ASEAN countries, only Cambodia, Laos and Vietnam lacked a supplementary pension scheme. Giang said developed countries already had the scheme in place, and it was compulsory instead of voluntary.

This February, the VinaCapital-backed VinaWealth Fund Management Co., Standard Chartered Bank, and auditing and business advisory services firm Grant Thornton set up a partnership toward the goal of carrying out a supplementary pension project in Vietnam. The alliance aims to make VinaWealth the manager of funds, Standard Chartered the supervisory and custody bank, and Grant Thornton the services provider.

VinaWealth was already in a position to carry out the supplementary pension project on a trial basis, said its CEO Sebastian Subba. Meanwhile, Grant Thornton Vietnam’s managing partner Kenneth Atkinson said his firm saw the introduction of supplementary pension as a move similar to previous developments in other Asian countries that had moved away from the cultural dependence on children who provide for parents in later life.