Solutions to restrict lump-sum social insurance withdrawal

With a focus on comprehensive institutionalization in accordance with Resolution No. 28-NQ/TW, addressing fundamental limit ations and shortcomings in practice, and drawing on selectively chosen international experiences, the goal is to correct the lump-sum social insurance withdrawal situation and reduce the annual exodus of 600,000 to 700,000 individuals from the system.

The Draft Amended Social Insurance Law has gone through various amendments and additions aimed at raising benefits, increasing attractiveness, and encouraging workers to preserve contribution periods for pension benefits rather than opting for a lump sum withdrawal. Changes include reducing the standards for pension entitlement (from 20 to 15 years), monthly allowances for people who do not meet the qualifications for a pension and are under the retirement age, and state-funded health insurance coverage throughout the time of monthly allowances. Unemployed people also obtain credit assistance to help them with their urgent financial needs.

To remedy the existing one-time withdrawal scenario, the Draft Amended Social Insurance Law proposes two alternatives:

Option 1 specifies one-time social insurance payouts for two distinct worker categories. Group 1 consists of individuals who participated in social insurance before to the effective date of the revised Law, quit after 12 months of employment, and did not reach the 20-year contribution threshold. If they desire, individuals can obtain a one-time social insurance benefit. Workers in Group 2 begin participating in social insurance on the implementation date of the modified Social Insurance Law (anticipated on 01/07/2025). They are not eligible for a one-time social insurance benefit and can only access it under certain conditions, such as reaching retirement age without having contributed for the required number of years, relocating abroad, or suffering from life-threatening diseases, as defined by existing Social Insurance Law provisions.

Option 2: After 12 months of no mandated social insurance coverage, voluntary participation, and fewer than 20 years of contributions, employees may request a partial payout, up to 50% of total contribution time into the retirement and death fund. The worker's remaining contribution time is retained so that he or she can continue to participate in and receive social insurance benefits.

Some commentators on the supplied information argue that improving benefits for social insurance members, as described in the Draft Law (amendment), is required. However, in addition to regulations that provide workers the option to withdraw or not, mechanisms to improve benefits and simplify procedures are required.

In relation to the mentioned problem, NA Delegate Pham Van Hoa of the National Assembly of Dong Thap province feels that alternative 2 is the more practicable and appropriate alternative in the current setting. Allowing workers to withdraw only up to 50% of their entire contribution time into the retirement and death fund compels them to think about the ramifications, perhaps lowering the number of workers leaving the system and boosting coverage while protecting retired workers' rights. Although the withdrawal amount is not large, it offers workers with cash assistance in dealing with pressing issues.

Furthermore, with 50% remaining, workers may continue to contribute to their future life. Even with a low pension, periodic increases to the basic wage can help retirees maintain their quality of life. Civil servants, for example, earned a base wage raise on July 1, and retirees will also benefit. With the regulation of compensation levels depending on employment positions, retirees will experience salary hikes by July 1, 2024. Retirement benefits are accompanied by other welfare initiatives.

"To encourage and persuade workers not to withdraw social insurance at once and confidently participate in social insurance, in addition to amending the Social Insurance Law, there needs to be mechanisms and favorable policies for workers who are forced to resign or lose their jobs to continue participating in the social insurance system, recognizing the advantages of pension benefits," said Pham Van Hoa, a delegate to the legislature.

In accordance with the aforementioned viewpoints, Delegate Nguyen Thi Ngoc Xuan of Binh Duong province advises developing financial assistance programs from the Social Insurance Fund for workers in need. Simultaneously, child support and other vulnerable groups in the family are proposed, as are expanding and improving unemployment benefits and facilitating better access to vocational training, job introduction services, and credit to help workers quickly find new jobs, reducing the need for a one-time withdrawal to ensure income and provide financial support without resorting to a one-time social insurance withdrawal.

In addition to the issues raised, comments on the Draft Social Insurance Law (amendment) suggest researching appropriate implementation timelines for the various one-time social insurance options in order to avoid creating policy shock for workers, which could lead to mass withdrawal and jeopardize social stability.