Building Universal Social Protection: ILO’s Roadmap for Vietnam’s Insurance Reform

The 2025 report "The Future of Social Insurance in Vietnam: Policy Options and Recommendations", developed by the International Labour Organization (ILO) with the support of the Governments of Japan and Ireland, charts an ambitious course for reforming Vietnam's social insurance system. Conducted by the ILO Social Protection Programme in Vietnam, the research aligns with the government's goal of achieving social insurance for all under Resolution 28-NQ/TW. It draws on extensive collaboration with the Ministry of Labour, Invalids and Social Affairs (MOLISA), the Vietnam General Confederation of Labour, and the Vietnam Chamber of Commerce and Industry. The report sets out concrete recommendations to strengthen coverage, adequacy, and long-term financial sustainability as Vietnam revises its 2014 Social Insurance Law.

Expanding Legal and Effective Coverage

Vietnam's social insurance has expanded rapidly, covering 38 percent of the workforce in 2022 compared to 23 percent in 2015. Yet millions of workers remain outside the system due to legal exclusions, high contribution costs, and cumbersome procedures. Domestic workers, part-time employees, household business owners, and gig workers often lack access. The ILO urges a gradual expansion of legal coverage, combined with simplified administrative procedures and better enforcement. Integrating databases across tax, labour, and business registration systems would reduce duplication and enhance compliance. Financial incentives, such as partial contribution subsidies for low-income earners and MSMEs, could make participation feasible, while communication campaigns are needed to build trust and awareness.

Tackling the Lump-Sum Withdrawal Challenge

One of Vietnam's most pressing challenges is the widespread withdrawal of social insurance savings as lump sums. Between 2016 and 2021, more people withdrew their contributions than began receiving pensions, particularly younger women under 35. This pattern undermines long-term protection, weakens solidarity, and complicates financial planning. The ILO proposes a phased reduction of the proportion of contributions eligible for withdrawal by about ten percent annually, while simultaneously extending waiting periods. This gradual reform would reduce the incentive for premature withdrawals without triggering backlash. To support affected workers, the report also calls for stronger short-term benefits, such as unemployment or maternity support, ensuring social insurance remains a reliable form of protection rather than a personal savings account.

Child Benefits: Investing in the Next Generation

A major innovation proposed by the ILO is the introduction of a national child benefit. Vietnam's social protection system currently provides little support to families with children, the only major life contingency not covered by social insurance. The report recommends a monthly allowance of 350,000 Vietnamese Dong per child, which would not only ease the cost of child-rearing but also make participation in social insurance more attractive. Analyses suggest such a policy could turn an average 8.2 percent welfare loss for contributing families into a 3.8 percent income gain. The proposed model is multi-tiered: a non-contributory benefit (Tier 1) funded by general taxation for uninsured families, and a contributory benefit (Tier 2) for insured workers under Vietnam Social Security (VSS). Gradually expanding the benefit, starting with children aged 0–3 and extending coverage over time, would allow manageable fiscal implementation while promoting inclusion and equity.

Modernizing the Pension System for Equity and Sustainability

The report envisions a multi-tier pension model combining contributory and non-contributory elements to ensure both coverage and adequacy. Vietnam's ongoing reforms, reducing the minimum contribution period for pension eligibility from 20 to 15 years and later to 10, are already moving toward international standards. The ILO outlines three design options: a simple pensions test, a tapered pensions test, and a universal pension. The recommended approach integrates the social and contributory pensions under VSS administration, simplifying governance and ensuring policy coherence. Regular indexation of pensions to inflation and wage growth is also essential to preserve purchasing power. To address gender disparities, the report proposes care credits, for example, 18 months of credited contributions per child, which could raise women's pensions by 8.3 percent and reduce the gender gap to 1.5 percent. Such measures would reward caregiving, improve gender equality, and strengthen long-term commitment to the system.

Coordinated Reform for Inclusive Development

The ILO concludes that Vietnam's social insurance reform must focus on four strategic priorities: expanding compulsory coverage, reforming lump-sum withdrawals, introducing a child benefit, and building a sustainable multi-tier pension system. These efforts must be supported by strong inter-ministerial coordination, linking social insurance with employment policies, labour market regulation, business registration, and macroeconomic development strategies. The report stresses that greater public investment in social protection is vital to ensure inclusion of low-income workers and progress toward universal coverage. Achieving this vision will not only secure livelihoods and strengthen the social contract but also underpin Vietnam's transition to an equitable, resilient, and inclusive economy, one that truly leaves no one behind.