The Vietnam Social Security Fund (VSS) has the word ‘Fund’ in its name. Thereby, this fund can also be understood with the same nature as any other investment fund on the market, with only one difference that this fund is under the control of the Government and State of Vietnam, not the business sector, a private company.
If employees graduate from university or, right after graduating from high school, start working in the enterprise sector, they will be forced to join the Vietnam Social Insurance Fund in the form of compulsory social insurance.
Each month, calculated according to the April 2023 formula, the employee must contribute 10.5% of the monthly salary to the fund, while the employee pays more than double, at 21.5% of the employee’s monthly salary, to the fund. If not taking into account the mandatory nature, this is the fact that employees deposit money into the social insurance investment fund every month with the expectation of earning a large profit when they retire.
Currently, the Vietnam Social Insurance Fund has a balance of about 36 billion USD, the number of ‘investors’ is up to tens of millions. With such a huge amount of money and the fact that these investors participate in the fund in a mandatory and involuntary form with a large amount of money each month, still the Vietnam Social Insurance Fund operates without any transparency to groups of employees or investors.
Specifically, the Vietnam Social Insurance Investment Fund did not provide any financial statements and balance sheets. Information is public from time to time, there is no specific plan such as using the investor’s investment money in the fund for reinvesting purposes.
Investors pay money but receive no information about how their funds are managed, used or operated. If there is a day when the social insurance fund or pension fund defaults, investors may not know the information as the fund manager may refuse to provide information, hide it in order to avoid panic, or further losses.
If employees join from the age of 20 when they graduate from school, it will take about 40 years before the employee can claim their benefits, namely the pension ranging from 33.75% or 45% to 75% of salary on which social insurance premiums are based according to the Draft Law on Vietnam Social Insurance in 2023. Only when they reach retirement age will employees know the effectiveness of monthly salary deductions in their whole working life.
View of Vietnam Social Insurance Fund as an investment fund
Living in ambiguity and uncertainty for decades, only knowing to pay but no control over any of their money is the reason that investors no longer have great confidence in the Vietnam Social Insurance Fund.
In addition to not regularly providing transparent information, when the Social Insurance Fund do provide information, it is often bad news, including the risk of fund failure, debt default, loss of liquidity, new method on limiting the amount of money employees can withdraw from the fund through the lump sum withdrawal policy of social insurance (up to 50% according to the Draft Law on Social Insurance).
This information further pushed the psychology of Vietnamese investors into the insurance fund into the ‘abyss’, causing the number of investors to decide to withdraw money and flee from the fund as quickly as possible increased in recent years.
In addition, the fact that Vietnam’s economy is unstable and inflation has increased sharply in the past few decades is also one of the reasons why investing in the social insurance fund, or any fund with a long-term principal payment is a big risk in the mind of investors. Although there is a policy of social insurance slippage coefficient to cope with inflation, in fact, the inflation equilibrium rate of the fund is completely not comparable to the inflation of the Vietnam Dong currency.
Because of the above reasons and many other reasons such as difficulties in responding to the Covid-19 pandemic, more and more people are choosing to withdraw their social insurance once, or through other methods to avoid paying and participating in social insurance fund.
For employees as well as investors, social insurance is a burden, so when given the opportunity, they will either leave immediately or deliberately negotiate with employees to avoid paying, in order to increase their monthly income.
It is not true that employees are not interested in retirement issues as well as other benefits when entering the fund such as health insurance, unemployment insurance, maternity benefits, etc. as these benefits support them greatly in different stages of life. However, with the current lack of transparency and unfavorable information flows for them, they will be ready to immediately exit the fund and choose to join other investment funds such as life insurance, financial investment funds, etc.