Transforming Vietnam’s Social Insurance: Digital Innovation and Policy Recommendations

Vietnam's Voluntary Social Insurance (VSI) scheme aims to provide informal workers with financial security, but low awareness, affordability concerns, and unpredictable contribution increases hinder participation. Expanding coverage requires policy reforms, digital accessibility, better outreach, and short-term benefits to attract and retain contributors.

Vietnam’s economic transformation from one of the world’s poorest countries to a low-middle-income nation has been remarkable. However, the country continues to grapple with a high rate of informal employment, leaving millions of workers without access to compulsory social insurance. Researchers from the World Bank and Vietnam’s General Statistics Office (GSO) have analyzed the Voluntary Social Insurance (VSI) scheme, introduced in 2006, as a solution to this challenge. Unlike the compulsory scheme, which is employer-funded, the VSI requires participants to contribute the full 22% of their chosen income level. To ease this burden, the government introduced subsidies in 2018, providing fixed support between VND 33,000 and VND 99,000 per month for up to ten years. While this led to an increase in participation from 271,000 in 2018 to 1.83 million by 2023, coverage remains low, with only a fraction of the informal workforce enrolling. Expanding this scheme is critical to ensuring financial security for Vietnam’s aging population.

Barriers to Participation: Awareness, Trust, and Affordability

Despite the government’s efforts, many informal workers remain unaware of the VSI scheme and its benefits. Outreach campaigns rely heavily on insurance agents, who receive commissions of up to 20% for enrolling new members. While agents are instrumental in expanding coverage, they struggle to retain contributors due to the complexity of the scheme and frequent policy changes. One of the major deterrents has been the unpredictable increase in minimum contributions, which are tied to the national poverty line. The most recent revision in 2021 saw the minimum contribution double overnight, leading to frustration among contributors. Without clear communication on why contributions increase and how they impact future benefits, trust in the scheme is undermined. Additionally, many workers find it difficult to commit to long-term contributions, fearing they may not see immediate returns. Unlike health insurance, which provides tangible short-term benefits, the VSI primarily offers pensions, making it less attractive to younger, liquidity-constrained workers.

Digitization: The Key to Accessibility and Efficiency

Vietnam has made significant strides in modernizing its social insurance system. The introduction of the VssID mobile application and the digitization of administrative processes have simplified registration and contributions. However, adoption of digital services remains low, with most registrations still taking place in person. Insurance agents remain the primary method of enrollment, particularly in rural areas where digital literacy is lower. Encouraging the use of online registration and automatic bank deductions could reduce dependence on agents, making the system more cost-effective and scalable. A digital pension calculator would also help contributors estimate their future benefits, addressing a major gap in understanding. Additionally, leveraging mobile payment platforms could provide greater convenience for contributors, particularly in urban areas where bank penetration is higher. While traditional outreach methods such as radio broadcasts and loudspeaker announcements are effective in rural communities, word-of-mouth recommendations from existing VSI participants have proven to be the most influential in driving enrollment.

Insights from the 2023 Survey: Who Joins and Who Doesn’t?

A 2023 survey conducted in Thai Nguyen, Nghe An, and Long An provinces provided deeper insights into participation trends. The survey found that active VSI contributors generally have higher household incomes, stable employment, and greater familiarity with the scheme. In contrast, those who have stopped contributing or never joined cite affordability concerns, distrust in the system, and unclear benefits. The survey also revealed that most respondents expect their incomes to grow only modestly over time, making them hesitant to commit to rising contribution rates. Additionally, many respondents prefer to retire between the ages of 50 and 60, which is earlier than the official retirement age of 62 for men and 60 for women. This misalignment suggests that clearer communication is needed to explain why retirement age increases are necessary for long-term pension sustainability. Another key finding was that the most common form of saving among respondents is keeping cash at home, particularly among women. This practice exposes savers to inflation and financial insecurity. Promoting the VSI as a secure and structured savings mechanism could help attract more participants, especially if it offers flexible contribution options and short-term benefits.

Path Forward: Reforms for Greater Participation

To expand coverage, Vietnam must take a multi-faceted approach, focusing on scheme design, outreach strategies, and digital transformation. First, contribution increases should be made gradual and predictable to prevent sudden financial shocks. Increasing state subsidies, particularly for low-income groups, could further ease the financial burden. Introducing short-term benefits such as maternity coverage and occupational accident insurance would make the scheme more attractive to a broader demographic. Offering a social pension incentive for long-term contributors could also encourage sustained participation. Second, outreach and service delivery need improvement. Creating a distinct VSI brand with clear, engaging messaging would enhance visibility. Encouraging digital registration and payment options would improve accessibility while reducing administrative costs. Training agents to better communicate scheme benefits and using targeted awareness campaigns based on behavioral insights could further boost enrollments. Third, robust monitoring and evaluation mechanisms should be established to track participation trends and outreach effectiveness. Identifying best-performing provinces and agents and rewarding them with incentives could further drive coverage expansion.

Vietnam has set ambitious targets under Resolution 28, aiming to cover 60% of the labor force with social insurance by 2030. Achieving this goal will require bold reforms to make VSI more accessible, attractive, and financially sustainable. Lessons from international models, such as Rwanda’s cooperative-driven enrollment and China’s subsidized pension scheme, highlight the importance of financial incentives, short-term benefits, and digital services in driving participation. Expanding VSI coverage is not just a policy objective—it is a crucial step in securing financial stability for millions of informal workers and ensuring long-term economic resilience as Vietnam’s population continues to age.