VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES NGUYEN BICH THUAN FINANCIAL STABILITY FOR THE PENSION SYSTEM IN SOME EUROPEAN COUNTRIES AND LESSSONS FOR VIETNAM Major: International Economics Code: 9 31 01 06
SUMMARY OF DOCTORAL DISSERTATION
HANOI, 2020
The dissertation has been completed at: VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES Scientific supervisors: 1. Assoc. Prof. Dr. Bui Nhat Quang 2. Assoc. Prof. Dr. Ngo Tuan Nghia Examiner 1: Assoc. Prof. Dr. Doan Xuan Thuy Examiner 2: Assoc. Prof. Dr. Le Thai Phong Examiner 3: Assoc. Prof. Dr. Tran Kim Chung The doctoral dissertation will be defended at the GASS-level Board of Examiners at ................................................................. ......................................................................................................
The doctoral dissertation can be found at: - National Library of Vietnam - Library of the Graduate Academy of Social Sciences
INTRODUCTION 1. Rationale for the study
The pension system is an important pillar of the social security system in which its objective is to eliminate the risks of poverty and instability in old age when an individual cannot work to cover their living costs for themselves. The sustainability of the pension system is extremely important in ensuring the development of the social security system and the harmony of the economy in each country. Financial stability for the pension system helps sustain social security, ensures people's lives, increases the sustainability of society, creates a working motivation for employees, thereby promoting economic development and social progress. As the society is developing rapidly and the aging population is happening in every country, the more attention is paid to the pension system. In practice, however, pension finance is at a very high risk of asymmetry because it depends on many unpredictable variables. In recent years, reform of the pension system has always been considered one of the urgent tasks of many countries in the process of developing their social security system.
The importance of securing the pension system is particularly important during the 2008-2009 financial crisis and the subsequent global economic recession. The financial crisis in countries like Greece and Italy shows the serious impact of the unsustainable pension system on a country's economy. In these countries, financial markets respond strongly and negatively to pension debt and pension fund solvency. In fact, there are great concerns about the budgets of developing countries as demographic projections for the next half century show a significant population aging. In many countries, although the pension system is relatively new, it has already borne the fiscal burden of an unsustainable pension financial system.
Vietnam is also facing challenges in terms of financial stability for retirement and the need to reform the pension system. Despite the remarkable economic developments over the past three decades, the
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general trend in the world, the declining fertility rate and the rapidly aging population structure has threatened the pension system of Vietnam. The goal of Vietnamese government is to develop a pension system that is appropriate for a middle-income country and at the same time meeting the international standards, to better ensure fundamental human rights. To do so, Vietnam needs to consult the experiences of many countries in the world, including European countries because this is the place where the first social security models in the world appeared.
In Europe, typically three countries the UK, Germany and Sweden adopting 3 different pension models derived from different social development models. All three countries have had many successes in high financial stability and pension programs. The retirement programs of these three countries now have more in common than in the past because they have made adjustments towards optimization. Therefore, their experience in financial stability for the pension system will be useful for Vietnam.
The author of the dissertation has chosen the research topic entitled: "Financial stability for the pension system in some European countries and lessons for Vietnam". 2. Research aims and objectives 2.1. Research aims
The dissertation clarifies the current financial stability situation for the pension system in 3 countries: the UK, Germany, and Sweden, thereby drawing lessons for Vietnam in the process of reforming the pension system in the future. 2.2. Research objectives Firstly, the dissertation clarifies the theoretical basis of financial stability for the pension system.
Secondly, the dissertation builds an analytical framework on the financial stability for the pension system in four countries: the UK, Germany, Sweden and Vietnam. Thirdly, the dissertation clarifies the financial stability situation for
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the pension system in three European countries, including the UK, Germany and Sweden and draws common and specific points in each country, and at the same time evaluates the achieved results of each. From that, benefits and limitations of financial stability for the pension system in each country are analyzed. Fourthly, the dissertation compares the similarities and differences between the pension system and financial stability for the pension system in Vietnam with the system of three European countries mentioned above on which lessons for Vietnam are drawn in securing the pension system in the context of rapid changes in social structure and international integration. 2.3. Research questions - What measurements need to be taken to secure the pension system? - Is the pension system in the UK, Germany and Sweden fully meeting the needs of the people? - Is the sources of finance of the pension system in the UK, Germany and Sweden stable? Does the pension payment come mainly from the public sector or private sector? - Should Vietnam fully apply the UK, German and Swedish models of financial stability of the pension system? (What advantages and disadvantages does Vietnam have to apply these 3 countries' financial stability models to its pension system?) 3. 3. Objects and scope of the study 3.1. Objects of the study The research object of the dissertation is the financial stability for the pension system in the three countries of the UK, Germany and Sweden. 3.2. Scope of the study
Content: The topic focuses on the contributive pension scheme, not on non-contributive contribution schemes, in which, payments – benefits and usage and management of the pension fund are the center of the research. These are factors affecting the financial stability of the pension fund. However, related to the welfare issues, it is unusual for any
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government to cut their budget on this. Expenditures tend to increase due to rising living standards and consumer price slippage. Therefore, financial stability tends to focus on raising revenues of the pension fund. This is also the focus of the dissertation.
Spatial scope: Studying financial stability issues for the European pension system and selecting three case studies for in- depth analysis: the UK, German, and Swedish pension systems. . These represent three different models in Europe, respectively Anglo Saxon model, Continental European model, Nordic model.
Scope of time: The research focuses on financial stability for the pension system in the UK, Germany and Sweden in the last two decades, but mainly since the global financial and economic crisis ( 2008-2009) until now - are the early years of the twenty-first century with strong adjustments in the social security system of many countries and the world, facing new social problems such as aging population, changes in employment due to rapid technological development, globalization and deep integration. 4. Methodology and research methods 4.1. Methodology The topic approaches the socio-economic interdisciplinary perspective from the perspective of international economics, welfare economics and public finance. With such approach, the dissertation applies secondary document analysis methods such as statistical analysis method, synthetic analysis method; Comparative analysis method. Data for analysis are collected from a variety of sources, mainly the researches of domestic and foreign authors; reports of related agencies and organizations and some information in the press. 4.2. Research methods - Statistical analysis method: using statistics, synthesizing, analyzing, calculating data - growth values, average values, density values ..., recovery information for the process of analyzing and evaluating the research contents
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- Comparative method: The dissertation is a case study in 3 the UK, German and Swedish pension systems and suggestions for Vietnam. Therefore, the method of comparison is very important to clarify the similarities and differences between financial stability for the pension system in the 3 countries analyzed. In addition, comparisons were used to analyze the pension system before and after the time of reform and adjustments. Comparative analysis method is widely applied in chapters 3 and 4 of the dissertation. - General analysis method: exploiting secondary information related to financial stability factors of the pension system to provide a theoretical and practical basis in applying the appropriate pension model for Vietnam. - The dissertation applies case analysis, representing different models in Europe, that is the case of the UK, Germany and Sweden. 5. Expected new contributions of the dissertation In term of theoretical contributions Developing the assessment framework on financial stability of pension system under three aspects of payments, benefits, and the usage management of the pension system.
Revealing the characteristics of financial stability of the pension systems in the UK, Germany and Sweden; and comparing some similarities and differences of these above mentioned countries’ systems to Vietnamese one.
In terms of practical contributions Showing results in securing the finance of the pension systems in the UK, Germany and Sweden.
Using the research results to provide solutions, propose experience for Vietnam in securing the finacial state of the pension system. 6. Theoretical and practical significance of the dissertation 6.1. Theoretical significance
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The dissertation contributes to clarify the theoretical basis on the financial stability for pension systems. The analytical framework that the dissertation proposes can be applied to the analysis of financial stability for the pension system in different countries and can be used as a reference for future studies. 6.2. Practical significance
The dissertation builds a comprehensive database of theoretical and practical analysis of financial stability for the pension system in the UK, Germany, and Sweden. This database can be used as references for different interested subjects to apply in their work practices. In addition, the experiences that the dissertation draws for Vietnam will be a useful reference for social managers and policy- makers to refer and apply. 7. Structure of the dissertation
Chapter 1: Literature Review Chapter 2: Theoretical framework on financial stability for the pension system Chương 3: Current situation of financial stability for the pension system in the UK, Germany and Sweden Chương 4: Some comparative assessments and lessons for
Vietnam
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Chapter 1: LITERATURE REVIEW
1.1. Publications related to the topic 1.1.1. Publications on the foundation of the pension system and the finance of social security
In the study of Ipek Eren Vural (2011) and Johannes Hagen (2013) showed that countries around the world have built their social security system according to two models: the Beveridge social security model and the model Bismark social security.
Michael Cihon & authors (2012) pointed out that there are many sources of financial income for the social security system, including taxes, contributions by employers and employees, income from investments. and a number of other sources of income, depending on the nature of the different social security programs and the goals of each social security system. 1.1.2. Publications on pension system and pension fund in general Publications on factors affecting the sustainability of the pension system
According to the study of Heinz P. Rudolph and Richard Hinz, financial market robustness has a strong influence on pension fund finances, a typical example is the economic crisis in the US that caused the financial market to plunged, leading to a serious deficit of investment funds.
Research by Stefan Engstrom & Anna Westernberg (2003), emphasizes the role of the state in providing retirement financial information to people. Accordingly, research shows that people who have financial knowledge tend to be more proactive in retirement investment decisions. Publications on the need of the private pension fund in the pension system Ignazio Visco (2005) affirms the importance of promoting the use of private capital, managing and monitoring pension fund operations to ensure the sustainability of the social security system. 1.1.3. Publications on the social security and the financial stability of pension systems in Europe
Studying social security policy adjustments in Nordic countries when the global economic crisis unfolded, authors Dinh Cong Tuan and Dinh Cong Hoang studied the effects of the financial crisis and global
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economic downturn to social security system in Nordic countries such as Sweden, Denmark, Finland and Norway in the period 2008-2011. 1.1.4. Publications on the issue of financial stability for Vietnamese pension system
For the Vietnamese pension system, there have been a number of studies, notably by Giang Thanh Long (2004), and Nguyen Khac Tuan (2017). In addition, there are many articles in the form of articles analyzing the problems of the Vietnamese pension system. 1.2. Research gap and research direction Research gap Through the literature review, the issue of financial stability for the pension system is a topic that has been mentioned in different angles.
Firstly, many authors and organizations such as World Bank (WB), Asian Development Bank (ADB) have studied from the current retirement models as well as built an ideal one for countries. Apply the same elements to analyzing the success of a retirement system.
Secondly, domestic and foreign studies have built up a fairly complete theoretical system of social security, financial stability for social security and the pension system. Besides, in theory, there are ideal retirement models that are proposed for countries to build along with current retirement financial models and the advantages and disadvantages of these models.
Thirdly, studies on this topic have used a variety of methods, such as case studies, comparisons, and different data models to find a suitable retirement model as well as what factors have can affect the sustainability of the pension system. From those studies, the works have given many solutions as well as policy recommendations for governments of countries.
Fourthly, on the factors affecting the sustainability of the pension system, there have been many in-depth studies analyzing and understanding these factors, through research in some typical countries.
However, studies have not built a complete and comprehensive research framework on financial stability for the pension system, especially in the UK, Germany and Sweden, which are three typical models with three
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different directions for the development of the pension system.
In Vietnam, there are many publications on the social security system of EU countries, however, the research focuses on analyzing the financial stability problem for the social security system, typically the financial stability of the pension system has not yet covered. Research direction
The dissertation will focus on researching the following aspects, through the study of 3 countries: the UK, Germany and Sweden and then draw lessons for Vietnam: (i) Ideal financial stability model for the pension system; (ii) Factors affecting the sustainability of the pension financial system: including factors such as population aging, economic development, people's perceptions, the role of homes country, employers and the development of private pension funds; (iii) Different modes to finance the pension system of a developing country at the risk of population aging, including adjusting the current model and the other necessary solutions. This will contribute both theoretically and practically for Vietnam. Summary of chapter 1
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Chapter 2: THEORETICAL FRAMEWORK ON FINANCIAL STABILITY FOR THE PENSION SYSTEM
In the research scope of this study, only the financial
2.1. Definitions and roles of pension system 2.1.1. Pension definition, pension plans, pension funds The pension system is a system in which there is a system of state agencies, businesses, individuals and organizations and unions operating under policies and decrees to ensure stable income for people whose age is over the working age in accordance with the regulations and in addition, the expenses for the disabled and those with below minimum income towards the goal of equity for all. and in addition, are expenditures for the disabled and below minimum income towards the goal of equity for all. The pension system is a system in which state agencies, businesses, individuals and organizations and unions operate under policies and decrees to ensure stable income for people. the end of the working age in accordance with the regulations and in addition, the expenses for the disabled and those with below minimum income towards the goal of equity for all. and in addition, are expenditures for the disabled and below minimum income towards the goal of equity for all. issues of the contributory pension scheme are focused on research. 2.1.2. Definition of financial stability for pension system
Financial stability for the pension system is the securing of planned retirement payments from the collection and use of pension funds. In other words, to ensure that the value of the fund's revenues is always greater than or equal to the pension fund's expenditures. More broadly, the financial stability of the pension system is the implementation of measures to ensure that the average growth of the average net income of the working age population and the retirees' incomes are the same over the long term (about 30-50 years). 2.1.3. The role of the pension system
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The model of the pension system in countries varies widely, depending on the socio-economic conditions and development goals of that country. However, the primary goal of the pension system is to set out to protect the elderly from the risks of poverty, while at the same time ensuring that they maintain a steady consumption ability in retirement compared to when they were still working. 2.2. The pension system structure 2.2.1. Components of the pension system The pension system has many activities to protect people from the dangers of life in old age and thus involves participation of many sectors. The pension system also has components similar to the social security system, including: the State; private companies, individuals and; associations and charities. 2.2.2. Pension schemes 2.2.3. Contents of financial stability for pension system 2.3. The financial stability measurements for the pension system 2.3.1. Securing revenue from contributions 2.3.1.1. Maintaining and expanding contribution levels 2.3.1.2. Changing contribution composition and structure 2.3.2. Securing revenues from the fund's investment 2.3.2.1. Superannuation fund monitoring mechanism 2.3.2.2. Pension fund risk management 2.4. Factors influencing financial balance of the pension system 2.4.1. National social security policies 2.4.2. Economic growth and employment issues 2.4.2.1. Macroeconomic factors 2.4.2.2. Social factors 2.4.3 The demographics issue 2.4.4. Pension fund management issues 2.5. Criterion for evaluating financial stability for the pension system
Summary of chapter 2
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Chapter 3: THE CURRENT SITUATION OF FINANCIAL STABILITY FOR THE PENSTION SYSTEM IN THE UK, GERMANY AND SWEDEN
3.1. Financial stability for the pension system in the UK 3.1.1. Factors influencing financial stability for the UK pension system The UK economy has shown signs of decline in recent years. However, as the world's first industrialized country, the UK was also one of the first countries to "struggle" through the post- industrialization crisis. According to Eurostat's population forecasts, currently the UK's population is growing rapidly, from 66 million (2018) to 71 million (2030) and 80 million (2060) (Eurostat), becoming one of the most populous region in Western Europe. This also has multi- dimensional impacts on the maintenance of the pension system in the UK. 3.1.2. Structure of the UK pension system 3.1.2.1. Pension schemes Pillar 1 – Pillar 0 – Social Social insurance welfare Pillar 2 – Occupational pension Pillar 3 – Savings
Pillar 4 – Healthcare and housing NHS Private pension
Occupational schemes - Stakeholder pension
The UK system of social protection for the elderly
Basic State pension (BSP) State second pension (S2P)
The UK has been operating a "mixed" pension system, which means that the state will pay a minimum pension, the rest will be
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accumulated by the funds that employees have participated in. responsible for payment. The UK job market is quite special when the majority of workers work in the private sector. According to 2003 statistics, only 18% of workers work in the public sector. 3.1.2.2. The UK pension fund balance The pension fund balance is reflected through the pension fund's revenues and expenditures.
Revenues Employers in 2017-18 contributed to the local government's pension Funds amounted to £ 9.5 billion, an increase of 27.7% compared to 2016-17, and the employee contribution was 2.1 billion pounds. Employer contribution increases due to some large up-front pension contributions made by a number and a regulatory increases in contribution rate.
The fund's revenue in the UK in 2017-18 was £ 16.5 billion, an increase of £ 2.9 billion, or 22%, from 2016-17.
Expenditures
Expenditures on insurance payments in 2017-18 were £ 9.8 billion, an increase of £ 0.3 billion or 2.9% from 2016-17. Of which, spending on pension and annuity was £ 8 billion, up 0.3 billion pounds (4.1%) and spending on insurance premiums when officially retired was £ 1.5 billion, down 37 million pounds (equivalent to 2.4%) compared to 2016 -17.
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Figure 3.4: Total spending and income of local insurance funds in England and Wales from 2013-2014 to 2017-18. (Unit: million pounds) Source: Ministry of Housing, Communities and Local Government (2018).
3.1.3. The measures of financial stability for the British pension system 3.1.3.1. Measures to increase revenue from contributors Although each ruling party has different ways of implementing it, in general, the UK government has two policies that affect the pension system in the UK: (1) cut spending on the home pension fund. water by gradually reducing its interest in national programs; (2) encourage the development and efficiency of the private pension system. 3.1.3.2. Measures to ensure investment returns of the fund In addition to increasing revenue from contributions, one
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of the most effective ways to finance the pension system is to ensure the return on investment of the retirement fund. In November 2000, the Accounting Standards Board (ASB) issued a new Financial Reporting Standard for retirement insurance plans (FRS17) under current accounting standards for reporting retirement expenses. in the DB pension regimes. 3.1.3.3. Fund management measures A pension fund is financed on each of the two types: a Defined- benefit (DB) or a Defined-contribution (DC) fund. DB and DC funds are managed in different directions to suit the nature of each fund. 3.1.4. Evaluation and reviews on financial guarantees for the UK pension system
The UK was one of the first countries in the world to develop formal private pensions (starting in the 18th century) and was also one of the first to begin a process of how to systematically invest in state pension funds and instead direct investment to private pension funds (starting in the 1980s). This is the main reason why the UK is one of the few countries in Europe that do not face a serious pension crisis.
freelancers and workers
Currently, the pension system in the UK is considered to be complex as well as discriminatory against certain subjects such as low-income employees, in smaller companies and from the number of groups in society such as women, the unemployed, those working in the informal sector. The main reason for the lack of social inequality is the mismatched link between the state pension system (BSP, Retirement Credit and S2P) and private retirement systems (which will enjoy the higher but the premium is higher). 3.2. Situation of financial stability for the pension system in Germany 3.2.1. Factors affecting financial stability for the pension system in Germany
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Germany is the leading economy in the world and plays a leading role in the economy of the European Union. Germany is one of the countries recovering well from the economic crisis and global recession in the euro area. Regarding the labor market in Germany, the German unemployment rate has decreased significantly in the past 10 years thanks to the active labor market policies of Germany. Accordingly, Germany is facing a labor shortage as an older generation of workers starts to retire while Germany has the lowest birth rate in the world, which means a decrease in the working age rate and the proportion of the population suffering from Aging increases rapidly.
3.2.2. Structure of German pension system
3.2.2.1. Pension schemes The German pension system is the world's first official pension system, designed by Bismarck almost 120 years ago.
Pillar 3 – Savings The German pension system following the 5-pillar model of the World Bank Pillar 2 – Occupational pension Pillar 1 – Social insurance Pillar 0 – Social welfare and Pillar 4 – Healthcar e housing
Public pension Occupational pension Old-age allowan ce Voluntary private pension
Housing and healthcare programs for the elderly
3.2.2.2. German pension fund balance Through many reforms, the German pension system is a combination of two pension schemes, a sponsored pension scheme and an unsubscribed pension scheme. This is a combination aimed at
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minimizing the existing limitations of the previous PAYG program under the influence of population aging. At a given point in time, the worker will not be protected by the effects of the rapid increase in the number of the elderly relative to the working population. Unfunded programs also involve government intervention when funds have solvency problems, which are completely unaffected by sponsored programs (WB). 3.2.3. The measures of financial stability for the British pension system
The German pension system has made many adjustments throughout its formation and development to maintain and expand the levels of contributions to the pension fund.
- Increasing retirement age
- Ensuring high coverage
- Adjusting the contribution level
- Adjustments to pension formula
- Change in components
3.2.3.3. Promote private pension funds
- New funding pillar: Introduction to additional pension funds
- Direct savings allowance
- Tax withholding special expenses
- The State encourages the retirement benefits according to groups (by occupation).
- Voluntary retirement insurance in financial retirement planning
3.2.4. Evaluation and reviews on financial stability for German pension system
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The pension system in Germany in general and the financial stability of retirement have had some successes and exist as follows:
First, the German multi-pillar pension system is one of the the entire in preventing poverty for most successful model population.
Second, one of Germany's other successes has been tackling the problem of the aging population, as other countries are still struggling with the effect of aging populations on the sustainability of social security systems. Germany has made appropriate adjustments to solve this problem.
Third, in addition, Germany has also successfully adjusted the pension system to balance the burden between generations, reducing costs for public pension funds through the provision of bonuses / deductions. for those who retire later / earlier by law, as well as the application of real wage pensions and the use of a sustainability factor formula to stabilize public pensions. The remaining problems:
Currently, the German pension insurance system is facing the challenge of balancing the fund between the insurer (the employee) and the pensioner on the other. While generosity in the German public pension system is seen as a great social achievement, the negative effects and aging population threaten the very core of the German pension system. 3.3. Situation of financial stability for the pension system in Sweden 3.3.1. Factors affecting financial stability for Sweden's pension system
Sweden is one of the countries with the highest standard of living in the world and a developed and sustainable social security system. Before the economic crisis in 2008, Sweden's economy developed stably due to increased domestic demand and increased exports. However, since the end of 2008, affected by the global economic recession, leading to a decline in foreign demand,
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Sweden's GDP growth has declined rapidly in the following years, leading to the increase in unemployment rate and inflation. 3.3.2. Swedish pension system structure
Sweden has built a highly ambitious retirement system that will achieve a form of social pension insurance and save money economically and sustainably in the long run. The goals of the Swedish pension system in recent years include ensuring social and intergenerational equity as well as the financial stability of the system.
2 Pillar 3 – Savings The Swedish NDC system calculates the benefits based on the individual's contribution throughout their lives, including the contributions made by the government on behalf of that individual during their time of unemployment, care children, sickness ... As noted above, the use of NDC is said to have a self-stabilizing mechanism in the pension formula in which changes in the external environment such as increasing average life expectancy or salary change. 3.3.2.1. Pension schemes Pillar 1 – Pillar 0 – Social Social insurance welfare – Pillar Occupationall pension
Insurance pension Income pension Occupational pension Voluntary private pension Pillar 4 – Health and housing Healthcare for the elderly
Table 3.9: The Swedish pension system following to the 5-pillar model of the World Bank
3.3.2.2. Swedish pension fund balance Sweden's pension system is the only country to use a multi-fund structure. The purpose of structuring various pension funds in Sweden is to achieve goals such as reducing market impact, diversifying management risk, enabling competition to reduce costs and improve efficiency. But there is also a limitation in the increase
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fund to manage operating expenses and
in fund management costs. Therefore, in recent years, Swedish public pension funds have more closely linked and exchanged. 3.3.3. The measure of financial stability for the Swedish pension system 3.3.3.1. Measures to maintain and expand revenue sources from contributors 3.3.3.2. Measures management The operating and management costs of the funds are an important factor in securing the pension system. Of the factors that influence the amount of pension funds, cost is the one with which responsible agencies have the greatest chance to influence. 3.3.4. Evaluations and reviews on financial stability for the Swedish pension system Sweden's social security system is considered to bring fairness to all people with high coverage. All citizens are protected in protective nets through many social security programs. In addition, Sweden is building a pension system with the privatization of the system, rather than depending entirely on public finance. In addition, these accounts are adjusted for inflation. This ensures financial sustainability when there is a strong link between growth in the income of the workforce and the taxes paid on that income, and the benefits retirees receive and employment. Benefit calculation based on age. Sweden has also been successful in keeping workers in the job market longer by building a calculation of pensions based on hours worked, penalties for early retirees and bonuses. people stay longer. However, the financial stability of the Swedish pension system still depends on the role of the state. People become passive when depending too much on the programs of the State.
Summary of chapter 3
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Chapter 4 SOME COMPARATIVE ASSESSMENTS AND LESSONS LEARNT FOR VIETNAM 4.1. Comparative reviews on the UK, German and Swedish pension systems 4.2. Overview of financial stability for Vietnamese pension system 4.2.1. Overview of Vietnam's pension system 4.2.2. Problems with financial stability for Vietnamese pension system Some challenges with Vietnam's pension system Income sources at retirement age Current problems 4.3. Some similarities, differences and lessons for Vietnam 4.3.1. Some similarities and differences Similarities: (i) Social orientation in building the pension system (ii) The multilayered abundance of social security and retirement systems (iii) Population aging trend. Differences: (i) Different levels of development (ii) Variety of security measures (iii) Resources 4.3.2. Lessons for Vietnam In the near future, Vietnam needs to actively reform its pension system to ensure the financial sustainability of the system in particular, and the social security system in general as well as ensure fairness between generations in this system. First, on the design side of PAYG: PAYG has so far exposed many intergenerational equity issues and this is particularly exacerbated under the influence of population aging.
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Second, solve the financial problem for the pension system in the context of population aging. Third, promote private retirement, reduce the replacement rate of mandatory retirement down. Fourth, on the issue of state management in ensuring investment efficiency of the pension system. Fifth, increase the coverage of the pension system 4.3.2. Orientations to apply in Vietnam Based on the actual situation of Vietnam and lessons from three models from the UK, Germany and Sweden, in the coming time, Vietnam needs to make the following adjustments to ensure the financial stability for the pension system: Firstly, Vietnam needs to adjust the contribution rate in the pension formula to financially stabilize the pension fund in the context of population aging. Secondly, there is a need to develop a complementary voluntary pension scheme. As a part of the reforming process in the pension system in many countries around the world, these schemes could fill the financial gap for pensioners as well as allow those with high income to increase their savings for the old age. Thirdly, it is necessary to improve the real payment system with the current predetermined benefit rate so that the pension system increases financial independence between generations. Fourthly, the financial imbalance of Vietnam's pension fund is caused by ineffective investment and fund management. Therefore, it is necessary to improve pension fund management in order to preserve and grow funds. Fifthly, the Vietnam Social Insurance Fund also needs to consider streamlining its apparatus to simplify procedures as well as cut operating costs of the fund. Lastly, Vietnam needs to strengthen propaganda and popularization of participation in social insurance for agencies, businesses and employers. The participation in social insurance aims to stabilize
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income for employees when they retire and also to reduce the burden on the State for social benefits in the future. CONCLUSION
The pension system is an important component of the social security system, playing an important role in the development of a country. Facing the impacts of economic and social factors, especially the population aging trend, the sustainability of the pension system of most countries in the world is facing many challenges. Today, many countries have paid attention and paid attention to ensuring the sustainable development of the social security system in general and the pension system in particular.
The financial stability for the pension system in the UK, Germany and Sweden follows three different models but has undergone many policy adjustments with the aim of ensuring the financial sustainability of the pension system. While the UK originally oriented the private pension system to expand, the German pension system was more dependent on public pension and slower in expanding the private pension system. . The early success of the UK pension system in the face of undeniable aging of the population still exists inequality among different social groups. On the other hand, Sweden is built towards universal coverage, with the development of many benefits for retirees, in which reforms both adjust the formula for calculating pensions, increase the retirement age, and expand private retirement.
Like other European countries, Vietnam has a pension system following the general principles, especially financial stability for retirement. Vietnam's social foundation is still limited, however, it is rapidly improving, increasingly approaching European developed countries. Currently, Vietnam's pension system is also facing the pension fund imbalance with many similarities with the problems facing European countries. The lessons learned through the financial stability analysis for the pension system of England, Germany and
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Sweden show that Vietnam needs to build an effective retirement model, not only pay attention to the financial resources from home. the country has to pay attention to private funding sources. Next are structural issues to deal with rapid population aging, the need to raise the retirement age as well as increase the required early retirement age to receive a pension. In addition, Vietnam needs to focus on the management of the pension fund to increase the efficiency of the fund's investment activities, thereby increasing income for the retirement fund.
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LIST OF AUTHOR'S PUBLICATIONS 1.Nguyen Bich Thuan (2018), Financial stability for the social security system: Some theoretical issues, European Studies Review, ISSN: 0868-3581, No. 2 (209), pp.36-45 . 2. Nguyen Bich Thuan (2020), The pension system in Germany and some lessons for Vietnam, European Studies Review, ISSN: 0868- 3581, No. 2 (233), pp.77-88. 3. Nguyen Bich Thuan (2020), Financial stability for the pension system in the UK, European Studies Review, ISSN: 0868- 3581, No. 11 (242), pp.39-49
