Seniors reluctant to work until retirement age just to qualify for maximum pension

After more than three decades of sitting at sewing machines, the 54-year-old now suffers from pain in the back, neck and joints.

With his children grown up and being able to take care of themselves, Hau has thought about retiring more than once, but the worry of getting a small pension and having to rely on his children prevented him from doing so.

A senior labor at a garment factory in Hanoi in 2022. Photo by VnExpress/Hong Chieu

Before 2021 the retirement age was 55 for women and 60 for men. Starting in 2021 the government will gradually increase the retirement age until it reaches 60 years for women and 62 over the next decade or so.

Those who retire at the retirement age and pay social insurance premiums for at least 35 years (for men) and 30 years (for women) will become eligible for the highest pension rate, 75% of the last salary they drew.

It means many senior workers will have to work many more years to get the maximum pension and feel financially more assured about retirement, despite having fully paid their social insurance premiums.

Hau has to work for another eight years until he reaches 62.

But the Hanoi Labor Union has called for changes to the law to enable workers retiring earlier to still get the 75% rate if they have paid the premiums for a certain number of years.

Hau is hopeful the proposal will be approved.

“If it gets approved, I will try a little more [to continue working] since I am already so close to the finish line.”

At 53, Nguyen Thi Hai Ha, who works for a government office in Dong Da District, Hanoi, has decided to retire at the end of this year though she has more than three years to reach retirement age and four months to pay social insurance for a full 30 years.

Many advise her to keep working, but she says her work is not as easy as they think with hundreds of small tasks to be completed every day.

“I won’t reach retirement age until 2027, and if I retire this year, I will only get 67% [of full] pension, which means around VND4 million (US$170) a month.”

She is aware the amount is low and of the risk of inflation, but says she is “way too tired to keep working.”

Hau and Ha are not the only aging workers who are not chasing the maximum pension.

According to Ministry of Labor, Invalids and Social Affairs, in 2016-21 more than 661,000 workers retired. Of them only 66% are eligible for the maximum rate.

In 2016-20 around 750,000 chose to exit the social insurance scheme every year, which means they got a lump sum payout but accepted that they would only get a small to no pension when they retire and lose free health insurance.

Most of them were unemployed for a year, people mainly aged 26-29 years and not working for the government.

More women (55.6%) than men (44.4%) opted for it.

Pham Thu Lan, deputy head of the Institute of Workers and Trade Union, said raising the retirement age is driving more people to exit social insurance, and allowing them to retire sooner but still get the maximum pension would check that trend.

Labor unions in many localities have made similar demands and a survey by VnExpress of 6,770 people found 95% agreeing with the change.

Nguyen Duy Cuong, deputy head of the Vietnam Social Security (VSS), which is working on amendments to the Law on Social Insurance, said the VSS would consider the proposal.

The amendments will be submitted to the Ministry of Labor, Invalids and Social Affairs before it goes to the government and then the National Assembly.

As of January 17.2 million people had signed up for social insurance, or just 38% of the workforce.