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The Pension Scheme in Vietnam: Current Status and Challenges in an Aging Society

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  • Giang, Thanh Long

Abstract

The publicly-managed Pay-As-You-Go (PAYG) defined-benefit pension scheme in Vietnam is described, with an analysis of its financial sustainability in the context of an aging society in a dynamically efficient economy. By using actuarial models developed by the International Labor Organization (ILO), the paper finds that the implicit pension debt (IPD) of the scheme is high in comparison with GDP of the year 2000, which is the base year for projections. Regarding the social aspect, a high IPD implies that the burden of maintaining this scheme is borne by the current and future participants. For this reason, the pension scheme in Vietnam will cause not only financial instability but also inter-generational inequity. In order to avoid this situation, the current scheme needs to be reformed. In particular, Vietnam should move to a partially-funded defined-contribution scheme with careful considerations of social and economic impacts so as to avoid both financial instability and inter-generational inequity.

Suggested Citation

  • Giang, Thanh Long, 2004. "The Pension Scheme in Vietnam: Current Status and Challenges in an Aging Society," MPRA Paper 969, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:969
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    Cited by:

    1. Giang Thanh Long & Wade D. Pfau, 2008. "Demographic Changes And The Long-Term Pension Finances In Vietnam: A Stochastic Actuarial Assessment," GRIPS Discussion Papers 08-05, National Graduate Institute for Policy Studies.
    2. Nguyen, Cuong & Van den Berg, Marrit, 2009. "The Impact of Public Transfers on Poverty and Inequality: Evidence from rural Vietnam," MPRA Paper 48671, University Library of Munich, Germany.
    3. Giang, Thanh Long & Pfau, Wade Donald, 2008. "Demographic Changes and Pension Finances in Vietnam," MPRA Paper 9931, University Library of Munich, Germany.
    4. Giang, Thanh Long & Pfau, Wade Donald, 2008. "Determinants of Elderly Poverty in Vietnam," MPRA Paper 9927, University Library of Munich, Germany.
    5. Giang, Thanh Long, 2005. "Pension Liabilities and Generational Relations: The Case of Vietnam," MPRA Paper 970, University Library of Munich, Germany, revised Mar 2006.
    6. Long T. Giang & Wade D. Pfau, 2009. "Vulnerability of Vietnamese Elderly to Poverty: Determinants and Policy Implications," Asian Economic Journal, East Asian Economic Association, vol. 23(4), pages 419-437, December.
    7. Nguyen Viet, Cuong, 2010. "The Impact of Social Security on Household Welfare: Evidence from a Transition Country," MPRA Paper 40777, University Library of Munich, Germany.

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    More about this item

    Keywords

    aging population; pension scheme; pension debt; financial sustainability; Vietnam;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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