Members of the Laughter Yoga club during morning exercise at a public park in Hanoi. Hundreds of millions of workers behind Asia's economic miracle, including those in Vietnam, are heading into uncertain old age after governments failed to set aside enough funds for their pensions, the Asian Development Bank has said. Photo: Reuters
Hundreds of millions of workers behind Asia's economic miracle, including those in Vietnam, are heading into uncertain old age after governments failed to set aside enough funds for their pensions, the Asian Development Bank said in a book released Tuesday (September 25).
The book, "Pension Systems in East and Southeast Asia: Promoting Fairness and Sustainability," forecast current or looming problems both in rapidly graying East Asia as well as younger Southeast Asia.
"Just as Asia's economic landscape was transformed... due to exceptionally rapid growth, its demographic landscape is transforming due to a change in population age structure that is unprecedented both in its scale and speed," it says.
Pension systems in Asia, particularly in developing nations, are "unprepared and underfunded to meet the needs of the region's rapidly aging population."
Vietnam's pension system covers just 20 percent of the labor force and will be in "large deficit" within 30 years, the book warns.
It advises that Vietnam should transform its current pension system to a system of individual accounts while simultaneously building a social assistance scheme for low-income persons.
"A notional defined-contribution plan (a type of retirement plan in which the amount of the employer's annual contribution is specified) should be considered as a transitional step to avoid making implicit pension liabilities explicit," it says.
It also says that while moving the pension scheme in this direction will help improve the fund balance, it will not be a panacea for the long term.
With its current status as a low middle-income country, Vietnam also needs to deal with long-term income security for a large number of low-income persons. A voluntary pension scheme and cash transfer programs should be considered as supplementary social protection pillar, the book suggests.
There is also a need to pay special attention to people living in rural and mountainous areas.
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