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Warnings from economists Pension system on the brink of collapse?

Status: 21.06.2021 10:35 a.m.

Too few contributors and high household burdens – experts repeatedly point out the problems of statutory pension insurance. Does that inevitably lead to retirement at 68 or even 70? By Andreas Braun, tagesschau.de The criticism of the German pension insurance system, which has been publicly discussed for weeks, is sharp. The entire structure of the pay-as-you-go pension has been called into question by economists in recent weeks. Many of the criticisms have been known for a long time, but above all caused a stir Paper of the scientific advisory board at the Federal Ministry of Economics , an advisory body within the federal government. Economics Minister Peter Altmaier himself presented the committee’s proposals as “not binding” on his ministry The advisory board is “independent”.

Pension and contribution guarantees aggravate the situation

With their description of the state of the German pension insurance system, the authors of the study are anything but alone among experts. You see “suddenly increasing financing problems” approaching the pension funds. These problems are mainly caused by the guarantee of the pension level introduced in 2018 at 48 percent of the average wage and the limitation of pension contributions to a maximum of 20 percent.

Together with the introduction of the “pension at 63”, this led to the deficit within the pension insurance system being further expanded. More than a quarter of the federal budget had to be diverted to the pension fund in 2019 to fill this gap. In 2040, almost half of the federal funds are threatened to be used for this.

Increasing life expectancy

The conclusion of the economists of the advisory board with its chairman, the Munich economics professor Klaus M. Schmidt, reads: The coupling of the retirement age to life expectancy is “inevitable”. So if Germans tend to live longer and receive longer pensions, the start of retirement will have to be pushed back accordingly. This would correspond to a “pension at 68” in around 20 years.

In addition, the experts are calling for pension increases no longer to be carried out consistently in the future. While existing pensions should only increase with the development of purchasing power, a guarantee of 48 percent, for example, can still be guaranteed for “access pensions”, ie employees who are going into retirement.

Criticism of “unsocial” proposals

While politicians from many parties immediately criticized the committee’s proposals as “anti-social” or unrealistic, the authors also received support from academia from other quarters. The researchers from the employer-related Institute of the German Economy (IW) also see a further extension of the working life as a sensible way to stabilize the German pension system.

IW study director Jochen Pimpertz sees this as an opportunity “to slow down the rise in premiums and at the same time to stabilize the security level”. He recommends raising the retirement age from 2031 by two months for each year of birth. In 2052, the standard retirement age would then be 70 years. The Freiburg economist Bernd Raffelhüschen also sees a dramatic need for reform in the pension system in Germany. The federal government can only choose between “plague and cholera,” he said in a recent interview. Either the contribution rates for the pension fund or the federal subsidy would have to be drastically increased. In the past few years, the federal government gave the “majority of the elderly” too generous gifts, he said.

Swedish stock pension model

Martin Werding, professor at the Ruhr University in Bochum, is calling for a radical move away from today’s pure pay-as-you-go financing. Werding has calculated that a “share pension”, in which employees invest two percent of their gross income in an equity fund, could increase pension payments by up to 30 percent for average earners who have been insured for many years. The consumer advice centers also consider such a provision component, which is based, for example, on the Swedish pension model, to be sensible. Klaus Müller, member of the board of directors of the Federal Association of Consumer Organizations, sees the share investment as an opportunity to get “more money in old age” for insured persons.

But even a fundamental reform of the pension system is unlikely to close the gap between earned income and retirement income for many contributors. The Riester pension, which was introduced around 20 years ago , however, many experts are convinced that it is hardly suitable for this. There are increasing votes for Riester subsidies to expire under a new federal government in autumn. A prominent critic of the Riester model is, for example, the economist and former “economy” Bert Rürup. He advocates pension accounts that could be managed by a foundation and should be accessible to all citizens. Here, too, the idea is that additional contributions are invested primarily in the capital market and converted into payment plans in old age that supplement the statutory pension

FAQ

Statutory old-age provision How the pension is financed

Status: 21.06.2021 10:35 a.m.

It is and should remain the foundation of the old-age provision of millions of Germans: the statutory pension. How does our pension system work and what are the challenges it faces?

From Andreas Braun, tagesschau.de

How is the statutory pension basically organized?

The statutory pension in Germany is organized according to the so-called pay-as-you-go system. Those who pay in do not build up a capital stock that they can fall back on in old age, but rather finance the current earnings of the current pensioners. Anyone who pays into the statutory pension thus acquires a right to such a pension in old age, for which the next generation then has to pay. After a certain waiting period – currently five years – this entitlement is given. In order to receive a pension, you must also have reached a certain age (currently 67 years as a rule).

Who pays into the statutory pension fund?

Employees in Germany are required to pay into the statutory pension. Employers take over half of the payments into the pension fund. The contribution rate is currently 18.6 percent, so 9.3 percent each comes from employees and employers. Self-employed, freelancers or people who are not gainfully employed can also make voluntary contributions. All contributors acquire pension entitlements to which a certain pension amount corresponds. It is determined by so-called “remuneration points”.

How much does the federal government pay into the pension fund from tax revenues?

Since the income from contributors has long been unable to cover the expenses of the pension fund, the federal government co-finances the fund through tax revenue. In 2020, these expenditures exceeded the 100 billion euro mark for the first time. The federal budget provides 106 billion euros for 2021. That is more than a quarter of the federal budget. According to experts the proportion could rise to more than 50 percent of the budget in the coming decades .

What caused the deficit in the pension fund?

The demographic development in Germany is the main reason: The number of people paying into the pension system is facing an increasing number of pensioners. In 2020 there were 57 pensioners for every 100 contributors. In 2050, it is estimated that 100 contributors will make payments for 77 retirees. Since the pension level has always been adjusted upwards in line with the general wage level and there have been no pension cuts, the deficit is growing steadily.

What is meant by the “sustainability factor”?

In order to be able to take into account the ratio of contributors to pension recipients when calculating the pension amount, the “sustainability factor” was introduced in 2005. It should lead to the fact that the pension increases are dampened with an unfavorable ratio of contributors to pensioners. However, only a quarter of the factor is included in the calculation.

What are the “stop lines” set by politicians?

The legislator has provided so-called stop lines, which secure the pension level and at the same time limit the contributions to the pension fund. It is planned that the pension level (with 45 years of contribution) will not fall below 48 percent of current average earnings by 2025. A second stop line relates to the level of contributions from employers and employees. The contribution rate may not exceed 18.6 percent until 2025.

Why is the situation in the pension funds worsening?

The increasingly unfavorable ratio of contributors to pensioners – together with the state guarantees for the amount of pensions and contributions – will further exacerbate the funding gap in the pension insurance scheme in the years to come. The federal government has not yet made any fundamental changes to this system.

What are the options for reforming the pension system?

Proposals for reform target both the revenue and the expenditure side of the statutory pension insurance system. In order to increase the income, either the contribution rates could be increased. In addition, statutory compulsory insurance is also being discussed for additional groups of people such as self-employed or civil servants. On the expenditure side, the pension amount can be reduced on the one hand, and the retirement age can be increased on the other. A link to general life expectancy, for example, is conceivable. The income from the contributions paid in, and thus also the future pension amount, could also be increased by investing more contributions in the capital market.

What should the insured expect in the coming years?

The growing imbalance between income and expenditure in the statutory pension insurance will make reforms necessary in the coming years – economists and politicians of the most important parties see this equally. Contribution rates are likely to rise while average pension levels are lowered and working lives are further extended. In any case, it is likely to become even more important for the insured to make private provision for old age

Compiler: ziyiZ

Source: InstitutionalInvestor

Source: GPLP Rhino Finance (ID: gplpcn)

Among the companies that pension funds will allocate funds to private equity companies in 2020, Thoma Bravo, which focuses on software and technology, is the most popular. According to new data, in terms of private equity investment, pension funds will invest the most in Thoma Bravo in 2020 , Followed by CVC Capital.

According to a report commissioned by Vidrio Financial, an alternative investment technology provider, in 2019, the California State Teachers’ Retirement System, the Florida State Board of Administration and the Massachusetts PRIM The 13 public pension funds in China have allocated a total of US$2.9 billion to the three Thoma Bravo funds.

As of March 31, 2021, Thoma Bravo manages $78 billion in assets.

In this regard, Vidrio founder and CEO Mazen Jabban said: “2020 brings new challenges, and allocators are looking for new options to cope with continued market volatility, cost pressures and diversification of alternative asset investments.”

The report stated that in 2019, investors allocated $103 billion in alternative investments among 600 different commissions. Most of the funding came from the second half of the year, after the worst economic slowdown.

CVC Capital Partners’ private equity fund ranked second in the survey, receiving $2.6 billion in funding from eight pension funds.

Among them, Oaktree Capital Management (Oaktree Capital Management) ranked third, invested 1.8 billion US dollars in three funds; Clearlake Capital ranked fourth, invested 1.3 billion US dollars in eight funds.

Vista Equity Partners received $1.1 billion from investors, and these funds flowed into six funds.

Overall, the surveyed pension funds invested US$46 billion in private equity investments in 2020. Among the funds included in the data set, CalSTRS had the highest allocation of private equity investments last year, reaching $31 billion.

Asset allocation reflects changes in the fortunes of companies under the lockdown

The investment of distributors reflects the impact of the big trend on the economy and emerging industries. People work from home, avoid travel and go to entertainment venues.

Vidrio found that “the role of the big trend in strategic choices cannot be ignored, because as consumers have delivered basic goods such as groceries to their homes, real estate managers have seen the attractiveness of unique logistics funds. It turns out that real estate investment trusts (Reit) Grocery store investment is as popular as laboratory real estate, as is investment in streaming entertainment service studio space.”

Vidrio also assessed the real estate, private business, and hedge fund companies with the highest commitments in 2020. The results show that pension funds allocated a total of 28 billion US dollars in physical assets in 2020, of which Stonepeak Infrastructure Partners received a maximum of 1.5 billion in five pension funds. The configuration of the dollar. PGIM received $1.2 billion from two pension funds-Massa Reserve PRIM and New York State Common Retirement Fund.

Private debt-20 billion U.S. dollars in capital inflow in 2020 is one of the areas that has boomed in recent years.

The report said: “Credit investment in private institutions is not suitable for those who cannot afford some lack of liquidity.” “People must be willing to bet and allow it to change within 5 to 10 years.”

In 2020, Ares Management received the highest private credit grant of $1.3 billion from the Alaska Permanent Fund, the Texas County and Territory Retirement System, and the Virginia Retirement System.

According to the report, although hedge funds have gone through a difficult few years, they have “made a comeback” with newly authorized investments of US$9 billion. The ever-popular Bridgewater Associates received the highest grant this year.

$900 million from the Oregon Investment Council. The fund is the highest allocator of hedge funds in 2020, injecting a total of US$1.4 billion into Bridgewater, quantitative fund management companies FORT and GMO.

Jabban said that Vidrio “saw many hedge fund managers entering the private investment field. On the contrary, there are also precedents for listing after investing in private fund managers.” He expects this trend to continue to move forward.

He said: “The convergence of public and private investment will pose challenges for operational due diligence and risk management, and changes need to be made so that organizations can control new opportunities and avoid falling into endless data and technical challenges.”

The most popular private equity company based on pension fund data

(The top five investment managers based on the amount of increase in 2020)

Debate about retirement at 68 Altmaier cashes in on plans from his advisors

As of: June 8th, 2021 3:33 p.m.

Work until 68 – this proposal from the Advisory Board of the Ministry of Economic Affairs creates massive headwinds. After the rejection of the coalition partners CSU and SPD, Altmaier now expressed himself: The retirement age is currently not an issue. Federal Minister of Economics Peter Altmaier has rejected an increase in the retirement age to 68 years, as recommended by an advisory committee of his house. The retirement age was set at 67 in the first grand coalition “at the suggestion of esteemed colleague” Franz Müntefering (SPD). “It should stay that way, that’s been my opinion for years,” wrote Altmaier on Twitter.

“Suddenly increasing financing problems”

The Scientific Advisory Board of the Ministry of Economics is independent, wrote Altmaier. His proposals are not binding on either the ministry or the minister. The Scientific Advisory Board of the Ministry of Economic Affairs – an advisory body – had proposed a reform towards the retirement age at 68. Because there was a threat of “sudden increasing financing problems in the statutory pension insurance from 2025”. The retirement age cannot be decoupled from the development of life expectancy in the long term.

CSU and SPD against raising the retirement age

The CSU also rejected ideas about raising the retirement age to 68 years. “We reject a later retirement age,” said CSU regional group leader Alexander Dobrindt. In order to make pensions more secure, an “effective reform of private provision is required,” he said. This must be “more successful and efficient,” said Dobrindt. The SPD had previously rejected an increase in the retirement age. He thinks this is the wrong way, said the federal labor minister responsible for pensions, Hubertus Heil, according to a statement from his ministry. The statutory pension is a central promise of the welfare state. It is about recognition of lifetime achievement and security in old age. “Everyone must be able to rely on that.”

“Unsocial, what is proposed there”

SPD parliamentary group leader Rolf Mützenich said that a new regulation for a possible entry age of 68 does not go with the SPD. “Pensioners and the generation that will retire in the next few years must not be further unsettled.” That will also play a role in the federal election campaign. SPD Chancellor candidate Olaf Scholz said: “I stand for the fact that we are not discussing any further increase in the statutory retirement age.” Scholz spoke of a “horror scenario” which should serve to “implement pension cuts for which there is no reason at this time”. According to Scholz, not only are the calculations wrong in the report. “What is being proposed there is also anti-social,” said the minister.

Advisory board proposes retirement at 68

The representatives of the Union and the SPD reacted to an opinion from the Scientific Advisory Board at the CDU-led Federal Ministry of Economics. The Scientific Advisory Board of the Ministry of Economic Affairs – an advisory body – had presented a concept that provides for longer work in old age and a limitation on future pension increases. The proposal mentioned a retirement age of 68 years in 2042. Currently, the rule applies that the age for entry into retirement without deductions should increase to 67 years by 2030. The advisory board warned that the pension system would head for a “financing shock” without further increases.

Employer President: “Lead honestly” pension discussion

Employer representatives were open to the experts’ suggestion. Employer President Rainer Dulger said with a view to demographic development that one should not get into a situation in which there are more service recipients than service providers. “The discussion must be conducted and it must be conducted honestly,” said Dulger. The topic cannot be concluded with stubborn rejection. People who would like to work longer should also be included in the discussion.

DGB and left indignant

The SPD gets a tailwind from its criticism from the German Trade Union Confederation (DGB) and the Left Party. The advisory body wants to “drastically cut pensions, dismantle the welfare state and privatize old-age pensions – all of this to massively relieve employers,” said DGB board member Anja Piel of the “Neue Osnabrücker Zeitung”. She accused the body of announcing the imminent ruin of the state on the basis of a fictitious legal status in order to then justify radical reforms. This is not scientifically based advice, but political propaganda. “From this oblique perspective, those affected are to blame if the pension is not enough: they could have made more private provisions,” said Piel. Left party leader Susanne Hennig-Wellsow spoke of an “asocial Oberhammer.” The left will “defend the rights of pensioners with tooth and nail”. What would be necessary would be a clear pension guarantee that bindingly excludes pension cuts as a result of the corona pandemic, said Hennig-Wellsow.

Government advisory council proposal Will you retire at 68?

Status: 07.06.2021 6:49 p.m.

Advisors to the federal government consider it necessary to raise the retirement age to 68 years. Otherwise, the pension will soon be heading for a “financing shock”. The left reacted indignantly. Advisors to the federal government proposed a reform towards the retirement age at 68 around three months before the general election. There was a risk of “sudden increasing financing problems in the statutory pension insurance from 2025”, predicted the Scientific Advisory Board at the Federal Ministry of Economics on the occasion of its new report on the future of pensions. According to the current legal situation, the age limit for the pension without deductions will be gradually increased from 65 to 67 years until 2029. The proposal could catapult the topic of pensions more strongly into the debates ahead of the federal elections. Because the positions of the advisory board are likely to meet with rejection from the SPD, the Greens, the left and the trade unions. “This is the anti-social Oberhammer,” said left party leader Susanne Hennig-Wellsow with a view to the report. Economics minister Peter Altmaier had to “cash in immediately” the corresponding report from his advisors, “otherwise the pension election campaign will start tomorrow”. The left will “defend the rights of pensioners with tooth and nail”. What would be necessary would be a clear pension guarantee that bindingly excludes pension cuts as a result of the corona pandemic, said Hennig-Wellsow.

“Dynamic coupling of the retirement age to life expectancy”

The experts emphasized that the retirement age cannot be decoupled from the development of life expectancy in the long term. “Instead, the additional years of life must be divided according to a clear rule between working more and receiving a longer pension.” To this end, there should be a “dynamic link between the retirement age and life expectancy”. The relationship between the time spent in work and in retirement should remain constant. According to current projections of life expectancy, such a rule would reach retirement age in 2042 at 68, said the director at the Max Planck Institute for Social Law and Social Policy, Axel Börsch-Supan, who was in charge of the report. The advisory board emphasized in its announcement: “Should life expectancy decrease, the retirement age may also decrease.”

“Sharply increasing subsidies from the federal budget” necessary

By calling for the retirement age to be linked to life expectancy, the committee made a proposal that has been causing waves in the pension policy debates in Germany for years. It is illusory to expect “that higher contributions and a lower pension level can be avoided in the long term”, according to the panel of experts. In the opinion of the advisory board, “sharply increasing subsidies from the federal budget” would have to flow into the pension fund if the valid holding lines for contributions and the pension level were to be maintained. “That would be at the expense of future investments, for example in education, infrastructure and climate protection, and would undermine the sustainability of our social system,” said the chairman of the advisory board, Klaus M. Schmidt, according to the announcement. The advisory board’s proposals also include making existing pensions less dynamic than new pensions when it comes to pension increases.

As announced, the Federal Cabinet has decided on a zero round for pensioners in West Germany this year. The retirement benefits will not be increased in July – as has been the case in previous years. In the east, too, there should be only a small increase of 0.72 percent.

In mathematical terms, the pension should even fall

The reason is the corona pandemic, as Minister of Social Affairs Hubertus Heil (SPD) said. The development of the pension is linked to the wages – and they had decreased on average in the past year. In purely arithmetical terms, the salaries for the more than 21 million pensioners in Germany would even have to fall by 3.25 percent. The statutory pension guarantee rules out a reduction in pensions, which is why salaries in the West remain at their current level. In the east, however, they are rising slightly because the pension value is to be gradually brought into line with that in the west by 2024. For the last time, a pension increase was canceled after the financial crisis in 2010. Since then, salaries have risen annually. In July of last year, pensions in the west rose by 3.45 percent and in the east by 4.2 percent, because the good wage development of 2019 was decisive.

The Ministry of Labor, Invalids and Social Affairs has just submitted a proposal to the Government to develop the Law on Social Insurance (amended) (social insurance). According to the Ministry of Labor, Invalids and Social Affairs, the current development of social insurance beneficiaries is below potential, many people are subject to compulsory social insurance but have not yet participated. The current law is “missing” many subjects Data from the General Statistics Office shows that in 2019, the whole country had more than 5.6 million individual business households, eight times the number of enterprises. According to the tax authorities, the country has more than 1.7 million times of households paying tax (households with turnover less than 100 million VND / year do not have to pay). However, this group is not subject to compulsory social insurance, so very few individual business householders participate in voluntary social insurance. According to data from the Ministry of Planning and Investment, in 2019 there are about 23,000 active cooperatives, attracting nearly six million members. In which 1.2 million people work in the cooperative area. But according to the report of the social insurance agency, there are nearly 7,000 cooperatives registered to participate in compulsory social insurance for about 41,000 employees. “Through a survey in some localities, many business managers, managers and executives of unpaid cooperatives wish to participate in compulsory social insurance …” – said by the Ministry of Labor, War Invalids and Social Affairs. Therefore, the Ministry of Labor, War Invalids and Social Affairs proposes to add compulsory social insurance participants for individual business householders, business managers, managers and cooperatives without pay. Specific provisions on compulsory social insurance for employees who work part-time and participate in compulsory social insurance with civil servants, public employees, part-time workers at commune level who also sign labor contracts. moving. According to the assessment of the Ministry of Labor, Invalids and Social Affairs, the above provision helps to increase the income of the social insurance fund in the short and medium term, while also increasing the expenditure from the social insurance fund in both short, medium and long term. The number of people who receive one-time social insurance to take care of their immediate life tends to increase. Photo: V.LONG Need to have a share in participating in social insurance According to the Ministry of Labor, Invalids and Social Affairs, the nature of risk sharing is only evident in sickness, maternity, labor accident, and occupational disease regimes. The pension policy is designed to be heavy on the principle of payment – benefit (pay more and enjoy more and vice versa) but lack attention to the principle of sharing between high and low salary people. According to data reported by the Vietnam Social Security, by the end of 2017, the average pension is 4.26 million VND / person / month. In which, the highest is 101.3 million VND / person / month, the lowest is 1.3 million VND / person / month (more than 4,100 people have this pension). The large gap in pension discourages people with low wages, leading to an increase in the number of people who want to receive one-time social insurance. In recent years, each year about 600,000 people enjoy one-time social insurance and leave the social insurance system. Therefore, this agency proposes to amend the method of calculating the average monthly salary paid for social insurance to calculate the pension for the employee, in the direction of the average monthly salary paid for social insurance of that person and the average monthly salary paid for social insurance. of people participating in social insurance to calculate their pensions. Thus, there will be a certain share between the high-paid and the low-paid. “The narrowing of the pension gap will encourage the participants of low-wage social insurance to reserve the time to pay social insurance to enjoy the pension instead of receiving one-time social insurance …” – The Ministry of Labor, War Invalids and Social Affairs assessed. The Ministry of Labor, Invalids and Social Affairs said that if allowed, the unit would be authorized by the Government to submit to the National Assembly for consideration and comments on the first bill at the second session of term XV (October 2022). Submit to the National Assembly for approval at the third session, term XV (May 2023). “Tighten” regulations on receiving social insurance once Currently, the condition to receive one-time social insurance is quite easy. Specifically, after one year of not participating in social insurance, the employee can receive one-time social insurance with the entitlement of 1.5 months of salary for each year participating in social insurance before 2014 and two months of salary for each participating year thereafter. Thus, with the contribution to the pension and death fund of 8% of the salary from the employee, the one year of paying 0.96 months of salary, the entitlement to two months’ salary upon receiving one-time social insurance is considered profitable. Along with having to wait too long to enjoy pension, employees will want to receive one-time social insurance to meet immediate needs. Therefore, it is necessary to adjust the regulations on one-time social insurance entitlement in the direction of having a roadmap to only deal with employees when they have reached the end of their working age but are not eligible for pensions without the need to continue paying. . Except for the case of going abroad to legally settle down or suffering from a dangerous disease and wishing to receive it once, or if the case is not yet over the working age, but receives one-time social insurance, the rate of entitlement is lower. In addition, the law also needs to amend the conditions for enjoying the pension in the direction of gradually reducing the number of years of minimum social insurance payment from 20 years to 15 years, towards 10 years with an appropriate calculated benefit level, creating conditions for The elderly, with a low number of years participating in social insurance, are entitled to pensions. 65% of Vietnamese elderly do not have a pension According to the Ministry of Labor, Invalids and Social Affairs, by the end of 2020, Vietnam has about 14.1 million people after the retirement age (55 years old for women, 60 years old and older for men). Of which, only over 3.1 million people are enjoying the pension (accounting for 22.1%) and 1.8 million people are enjoying the retirement allowance. There are still about 9.2 million people after the retirement age (accounting for 65%) who have not participated in insurance or any other social security layer.

The Vietnam Social Security Agency informed that, over the past time, due to the prolonged effect of Covid-19, many employees (employees) quit their jobs and lost their jobs, so they chose to receive social insurance once. According to the statistics of Vietnam Social Security, only in the first 3 months of 2021, the number of people enjoying one-time social insurance up to more than 226,500 people, an increase of more than 20.5% over the same period in 2020.

Many employees enjoy one-time social insurance with the desire to have an amount of money to cover their current lives. At the same time, a part of the employees still have the concept of “young depend on their father, old and trust their children”, not forming a habit when children pay social insurance so that when they get old, they can have a pension and control their own life. must depend on descendants.

The fact that an employee registers to receive social insurance once, leaves the social insurance system by himself is a worrying situation, not only directly affects the interests of employees, but also affects the socio-economic situation, as well. such as ensuring social security for the people of the Party and State.

The Vietnam Social Insurance Agency affirmed: Receiving the one-time social insurance only gives employees immediate benefits, but the employees have not fully foreseen the risks of losing many of their long-term benefits.

firstAccording to the current law, the total social insurance contribution to the retirement and survivorship fund is 22% of the monthly salary as a basis for the employee’s social insurance payment. In which, the employee pays 8% and the employer pays 14%, the total annual contribution to the social insurance fund. This specific ratio is equal to 2.64 month salary per year.

Meanwhile, if the employee is entitled to one-time social insurance, the annual entitlement rate of social insurance payment is only 1.5 months of the average monthly salary paid for social insurance for the years of payment before 2014 and equal to 2 months of the average monthly salary paid for social insurance. for the closed years from 2014 onwards.

Thus, if receiving one-time social insurance, the employee will lose about 1.14 months of salary for each year of social insurance payment before 2014 and about 0.64 months of salary for each year of social insurance payment after 2014.

Monday, When receiving one-time social insurance, employees will no longer have the opportunity to enjoy their pension, have no stable monthly income to ensure their life in old age. This is a very dangerous thing and leads to other disadvantaged consequences such as: not being granted a free health insurance card to enjoy the benefits of medical examination and treatment with health insurance, health care in old age, an age prone to difficulties. health assessment of each person. Because pensioners will be provided with free health insurance cards during the period of pension entitlement.

Moreover, the employee’s relatives are not entitled to the death benefit when the employee’s unfortunate death. Because if enjoying the pension, when unfortunately dies, the person who takes care of the funeral will receive a one-time funeral allowance equal to 10 times the base salary in the month the pensioner dies and their relatives are entitled to the death allowance. survivor monthly or once.

Ho Chi Minh City social insurance officials mobilize people to participate in social insurance to have a pension when they get old

Tuesday, the money paid to the social insurance fund is a valuable reserve of the employees themselves, it is not lost, but on the contrary, it is managed and invested by the social insurance agency.

In case, with the immediate difficulties (due to job loss, income loss), employees can completely reserve the time to pay social insurance, so that when possible, continue to participate in compulsory social insurance or participate in voluntary social insurance.

Conversely, when the employee has received one-time social insurance, if he / she participates in social insurance again, he / she will not be added to the time of previous social insurance payment, leading to when he is old enough to receive the pension, he / she may not be eligible for the time of payment to receive. pension or pay-period eligibility to receive a pension but the pension rate will not be high.

WednesdayWhen social insurance participants enjoy their pension, the pension level is adjusted periodically according to the consumer price index and economic growth (since 2003, the State has increased the pension by 17 times, with increases from about 7.5% to 9.3% for each adjustment, depending on the target group).

The total monetary benefits when enjoying the pension are much higher than when enjoying one-time social insurance

Sharing the concern about the increase in the number of employees receiving one-time social insurance, Mr. Do Ngoc Tho, Head of the Policy Implementation Department of Social Insurance and Vietnam Social Insurance, affirmed that when an employee receives one-time social insurance, the employee will suffer a lot, because Not yet at retirement age, all old pension money has been spent. When you get old, you cannot receive pension benefits and depend on children, grandchildren and the society.

If they unfortunately get sick and do not have a health insurance card, they also face the risk of not being able to pay the cost of medical examination and treatment after just one illness, long hospital stay, possibly facing poverty. hunger and exhaustion become a burden on families and society.

Mr. Do Ngoc Tho analyzed and took an example of an employee who has full 20 years of social insurance payment, with the average salary of 4 million VND / month for social insurance. Assuming this employee is eligible for a pension or a lump-sum social insurance benefit in 2021, if they are entitled to a pension, the male employee may receive a pension of 1.88 million VND / month.

Based on the average life expectancy of men of 71 years (the average life expectancy of men according to the General Statistics Office 2019), the number of months enjoying pension is 129 months. The total amount of money that person is entitled to from the social insurance fund is nearly 274 million dong.

In which, the total pension received from the age of 60 years and 3 months until death is 129 months x 1.88 million dong = nearly 243 million dong; buying health insurance card (4.5%) equaling nearly 11 million dong; a funeral allowance upon death (10 months base salary), equivalent to 14.9 million dong; survivorship allowance (assuming the lowest one-time death equal to 3-month pension) is over 5.6 million dong.

Many workers in Ho Chi Minh City participate in social insurance to have pensions to help control their life in old age

For female employees, because the percentage of female employees to enjoy pensions is higher (55%) and the period of enjoying pensions of women is longer than that of men (the average life expectancy of women is 76.3 years, equivalent to that after retiring at the age of 55 years and 4 months, retirees will live 240 months), so the total amount a female employee in this example will be entitled to from the social insurance fund is nearly 573 million dong.

Meanwhile, assuming that the employee goes abroad to settle down or has a life-threatening illness such as cancer, polio, cirrhosis, leprosy, severe tuberculosis, HIV infection has turned to AIDS and other diseases. according to regulations of the Ministry of Health; If receiving one-time social insurance, for both men and women, they will follow the calculation as follows: 4 million VND x (1.5 x 13 + 2 x 7) = 134 million VND. Thus, men on pension will benefit more than receiving one-time social insurance of nearly 140 million dong.

Thus, if compared with pension entitlement, receiving one-time social insurance is very disadvantageous for the employees. Because, when social insurance participants enjoy their pension, they enjoy a lot of benefits and the fact shows that the new pension is a solid support for employees when they get old, when they no longer have the ability to generate income.

Mr. Do Ngoc Tho also emphasized that receiving social insurance once will bring many disadvantages for employees. Employees should not for immediate benefits but miss the opportunity to enjoy a pension to cover their lives, as well as to enjoy the health insurance regime to take care of their health in old age. If the same time of social insurance payment is paid, the total monetary benefits when enjoying the monthly pension will be much higher than when enjoying one-time social insurance.

Mr. Do Ngoc Tho recommends that employees consider carefully, should not decide to enjoy one-time social insurance, but should reserve the time to pay social insurance so that when possible, continue to participate in compulsory social insurance or participate in voluntary social insurance. conditions to self-guarantee and take care of their own health when they get old, and at the end of their working age.

During the period of time reservation of social insurance payment, if unfortunately the employee dies, the family is entitled to a funeral allowance equal to 10 months of base salary and their relatives depending on the conditions for monthly survivorship allowance (up to 4 people ) to adulthood (if the child) or until death (if the wife, husband or father, mother is out of working age and has no income or income but is lower than the base salary); In case of receiving one-time survivorship allowance, the allowance level is calculated as one-time social insurance.

Persons on death pension, if there is a relative who is eligible for the monthly survivorship allowance. In fact, there are fathers, mothers, spouses and children who have received a monthly survivorship allowance several decades after the death of their child, spouse or parent.

Propagandizing about social insurance policies for employees. (Photo: PV / Vietnam +)

Over the past time, due to the long-term effects of COVID-19 epidemic, many employees quit their jobs and lost their jobs, so they chose to receive social insurance once. This means that in the future, these employees will not have monthly income from their retirement pensions to ensure their life and will not be issued with free health insurance cards for care. Health in the old age, age often encounter many health uncertainties.

One-time social insurance recipients increased sharply

According to the statistics of Vietnam Social Insurance, the number of employees taking one-off social insurance leave is on an increasing trend over the years, the 2016-2020 period has an average annual growth rate of about 9%. Worryingly, in the first three months of 2021, the number of employees receiving one-time social insurance continues to increase rapidly.

Only in the first three months of the year, the whole country had 226,503 people receiving one-time social insurance, an increase of more than 20% compared to the same period in 2020. Some localities affected by the COVID-19 epidemic had the number of insured people. Social once increased such as: Khanh Hoa, Quang Nam, Da Nang …

The representative of the Vietnam Social Insurance Agency said that the cause of the above situation was mainly due to the impact of the COVID-19 epidemic, which made businesses difficult, leading to many employees to quit their jobs. Up to now, the employee has stopped working for 12 months, so they should apply for social insurance once with the desire to have a sum of money to cover their current life.

Labor procedures to receive unemployment insurance due to job loss because of COVID-19. (Photo: PV / Vietnam +)

Analysis by the period of time off waiting for pension entitlement shows that in the 2016-2019 period, the one-time social insurance beneficiaries are mainly employees after a year of leave without social insurance payment, on average, accounting for about 97%.

In addition to the difficulty of income, there is still a small proportion of employees still think “children trust their father, old depend on children”, not forming a habit when children pay social insurance so that when they get old they have a salary. retired, not dependent on descendants.

Many disadvantages for employees

The fact that employees register for one-time social insurance, leave the social insurance system by themselves is a worrying situation, not only directly affecting the interests of employees, but also affecting to the socio-economic situation, as well as to ensure social security for the people of the Party and State.

According to the calculation of the social insurance agency, if receiving social insurance once, the employee will lose about 1.14 months of salary for each year of social insurance payment before 2014 and about 0.64 months. salary for each year of social insurance payment after 2014. Not only affecting immediate profit, receiving one-time social insurance makes employees lose their chance to enjoy pension, there is no guarantee for life in old age.

Settlement of insurance benefits for employees. (Artwork: Vietnam +)

Sharing worries about the increase in the number of employees receiving social insurance once in the first 3 months of 2021, Mr. Do Ngoc Tho, Head of the Policy Implementation Department of social insurance (Vietnam Social Insurance) said: “As the organization implementing the policy, we really feel very regretful when the employees choose the plan to receive one-time social insurance instead of choosing to preserve the paid time and wait for conditions to continue participating in social insurance, accumulate to enjoy the pension at the end of the working age. ”

According to Mr. Do Ngoc Tho, when receiving the one-time social insurance, employees will suffer a lot, because they are not old enough to retire, they have spent all their old-age pension. When you get old, you cannot receive pension benefits and depend on children, grandchildren and the society.

“If unfortunately sick, no card Health Insurance According to the pension regime, when old workers are still facing the risk of not being able to pay for medical examination and treatment costs after only one illness, long-term hospital stay, they may face poverty. hunger and exhaustion become a burden on families and society, ”said Do Ngoc Tho.

Mr. Bui Sy Loi, Deputy Chairman of the Committee on Social Affairs of the National Assembly emphasized that the status of receiving one-time social insurance makes efforts to mobilize and expand social insurance coverage to face many more difficult.

According to Mr. Bui Sy Loi, employees who receive one-time social insurance means that they leave the system to receive social insurance, self-stripping of the right to participate and enjoy social insurance benefits. especially long-term benefits such as retirement and death. This is an alarming and worrying situation in ensuring rights and policies Social Security long term for employees.

Mr. Do Ngoc Tho suggested that trade unions at all levels should coordinate with the local social insurance to focus on information and communication widely to employees about the superiority and long-term benefits of continuing to participate in insurance. society to workers; It is recommended that employees consider carefully, should not decide to enjoy one-time social insurance, but should reserve the time to pay social insurance so that when conditions permit, they should continue to participate in compulsory social insurance or participate. participate in voluntary social insurance, in order to have conditions for self-assurance and health care for themselves in the old age, at the end of working age./.

Statistics of the Vietnam Social Insurance show that in the 2016-2019 period, the one-time social insurance beneficiaries were mainly young workers and concentrated in the non-state sector, the age of the number of people. The most lump-sum leave to enjoy social insurance is from 26-29 years old, and the average age of one-off social insurance entitlement will gradually increase from 32.5 years old in 2016 to 33.3 years old in 2019.

The rate of one-time social insurance benefits for women is higher than that of men, respectively 55.63% for women and 44.37% for men in the 2016-2019 period.