There is a growing trend of individuals opting to withdraw their social insurance benefits in a lump sum after leaving their jobs instead of waiting to receive monthly pension payments.
While this choice may provide a substantial amount of money upfront, it can lead to financial difficulties later in life, especially if the funds are exhausted. For those who can no longer work, their well-being may be severely impacted.
To encourage continued participation in the social insurance program and ensure long-term welfare, the National Assembly has passed an amended Social Insurance Law, which will come into effect on July 1, 2025, with significant changes. Notably, the law includes adjustments to the conditions and amounts of one-time allowances upon retirement.
Changes to the conditions for receiving a one-time allowance:
According to the current Social Insurance Law of 2014, employees who retire and have social insurance contribution years exceeding the corresponding maximum pension rate (75%) are eligible for a one-time allowance. Specifically, for each year of contribution beyond the threshold, they receive an additional 0.5 months’ worth of the average salary used as the basis for social insurance contributions.
However, as of July 1, 2025, the new Social Insurance Law will modify this condition. Specifically, male employees with more than 35 years of social insurance contributions and female employees with over 30 years of contributions will, upon retirement, be entitled to a one-time allowance in addition to their monthly pension.
The one-time allowance will be significantly higher:
According to Clause 2, Article 68 of the 2024 Social Insurance Law, the one-time allowance is determined based on two cases. The details are as follows:
Case 1:
For employees who meet the retirement age criteria and immediately initiate pension benefit procedures, each year of social insurance contribution beyond the threshold will be calculated as 0.5 times the average salary used as the basis for social insurance contributions.
This calculation remains consistent with the provisions of the current 2014 Social Insurance Law.
Case 2:
For employees who have met the retirement age criteria but continue to work and contribute to social insurance beyond the retirement age, each year beyond the threshold will be calculated as 2 times the average salary used as the basis for social insurance contributions.
This allowance is four times higher than the current regulation, a substantial increase that could motivate employees to extend their working years.
Starting July 1, 2025, two groups will receive increased pensions:
Based on Article 67 of the 2024 Social Insurance Law, pension adjustments will be made as follows:
Pensions will be adjusted based on the consumer price index, taking into account the state budget and social insurance fund capabilities.
Reasonable pension increases will be implemented for individuals with low pension amounts and those who retired before 1995 to narrow the pension gap between retirees from different periods.
The government will determine the timing, beneficiaries, and adjustment levels as outlined in this article.
Accordingly, from July 1, 2025, employees will be eligible for reasonable pension increases to narrow the pension gap between retirees from different periods if they meet the following two criteria:
They have low pension amounts.
They retired before 1995.
What is the Minimum Pension Amount Starting July 1, 2025?
As per the Social Insurance Law of 2024, from July 1, 2025, the minimum pension will no longer be a fixed amount but will be dependent on a reference level determined by the government. It is important to note that this reference level will not be lower than the current base salary.
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