In the Draft Law on Social Insurance of Vietnam in 2023, two options for lump sum social insurance withdrawal were proposed. Accordingly, there is a proposal that employees can only withdraw up to 50% of the time of paying social insurance contributions, which has aroused many objections in public opinion.
The draft revised Law on Social Insurance in 2023 proposes two options for lump sum withdrawal of social insurance, including:
Keeping current regulations: Employees who participate in social insurance for less than 20 years and after one year of leave that they do not continue to pay compulsory or voluntary social insurance contributions, they may withdraw lump sum social insurance. With this option, employees will completely withdraw from the social insurance system and will not be entitled to pensions, health insurance, and funeral allowances for the purpose of social security when they are old.
Allow employees to withdraw up to 50% of the total payment period: With this option, the employee will be limited in the lump-sum social insurance payment (up to 50%, but the employee might not have a 50% withdrawal, possibly lower). However, the remaining amount will not be lost, but will be reserved so that employees can still enjoy social insurance benefits when they retire including pensions, health insurance, funeral allowances, etc. half of the benefit level compared to before withdrawal.
Perspectives on two options to withdraw lump sum social insurance
With the first option, ie current regulations, the fact proves that the low level of benefits does not prevent employees from completely withdrawing from the Vietnam social insurance fund.
Over the years, the number of employees who withdraw from social insurance to cover their lives during the pandemic or for other reasons has steadily increased each year.
In many cases, employees withdraw the entire closing process but later regret it, and want to return, but there is no legal basis for them to do so. They are forced to re-join from the first year and have to work for at least 10 more years before they can pay a lump sum payment with a high fee.
Because of the sharp increase in the lump sum social insurance withdrawal, it has affected the liquidity of the social insurance fund, impacted the social safety net, and put pressure on the pension spending budget. Similar to other funds, the social insurance fund can also be considered an investment fund or a bank that uses the part of the social insurance contributions paid by employees and employers for profitable reinvestment.
If depositors simultaneously withdraw money from the fund, it is likely to lead to the risk of bankruptcy, default due to illiquidity, similar to recent major world crashes such as SVB (USA), SCB (Vietnam – not yet collapsed) or Credit Suisse (Switzerland),...
With the second option, employees can withdraw up to half of the payment period to the social insurance fund, the rest is reserved for re-entry into the social insurance fund or have a backup support through the form of pensions, medical benefits, etc. in old age.
However, from the employee's perspective, this proposal is no different from the Social Insurance Department banning employees from accessing half of the money they contribute to the fund, similar to freezing half of their bank accounts.
Thereby, the majority of employees completely disagree with this proposal, thereby, it is likely that the proposal will not be approved. With the mentality that money is safe in hand, just suggesting and making this proposal can make employees lose even more faith in the social insurance fund, creating unpredictable consequences such as the number of people who want to withdraw from the fund will increase sharply in 2023 – 2024 before the Draft Law on Social Insurance is expected to take effect in 2025.
When the Government submitted to the National Assembly to amend regulations in the direction of allowing employees to choose to receive lump sum social insurance benefits, or reserve to continue paying if conditions permit, it created a fierce debate among delegates with over 87% of the delegates agreed with the policy for employees to receive lump sum social insurance if needed.
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