The problem of investing and managing social insurance pension funds effectively and sustainably

Large resources but modest investment scale

According to data from FiinGroup, there are currently 10 voluntary pension funds established and operating but their scale is still limited while Vietnam Social Security is not allowed to invest in corporate stocks and bonds.

1.2 million billion VND, if invested in the market, can become a great resource to help develop Vietnam's capital market. Although Vietnam's stock market is booming with the number of private stock investor accounts reaching up to 8 million accounts. However, the number of institutional investors is still very modest.

To develop a sustainable capital market, experts say it is necessary to promote the development of institutional investors.

Mr. Nguyen Duc Chi - Deputy Minister of Finance admitted: "The fact that the number of institutional investors is still modest is an unsustainable point of the Vietnamese market. So how to change this? Promoting the development of institutional investors is a task that State management agencies have long recognized and included in the focus of development in the coming time. However, there is still a lot that needs to be done."

So how is the remaining 1.2 million billion VND of Vietnam Social Insurance being managed?

Previously, at the discussion session at the group on the revised social insurance law , Minister of Finance Ho Duc Phoc said: "The Social Insurance Fund invests in two areas. Of which, 80% is invested in Government bonds, which have solid guarantees and support for the budget and fiscal policies but the interest rates are not high. The remaining 20% ​​is deposited in commercial banks, but only deposited in 4 large banks to ensure safety."

How to preserve capital and not break your retirement fund?

The management of the remaining 1.2 million billion VND of Vietnam Social Insurance is causing mixed debates among experts.

Talking to reporters from Lao Dong Newspaper, Dr. Dinh The Hien - an economic expert said: "The social insurance fund should not be viewed as an investment fund. The fact that Social Insurance uses 80% of the money to buy Government bonds and 20% is deposited in Big 4 banks is a good thing, helping the Government and State-owned commercial banks have cheap capital to implement social security goals. society and national development. If viewed from an investment perspective, the development of voluntary pension funds should be encouraged like foreign models."

Contrary to the above view, an expert said: "Currently, the social insurance fund is mainly used to buy Government bonds with low investment efficiency. I think protecting State assets is good, but it is necessary to diversify investment channels of 1.2 million billion VND to avoid bankruptcy of the pension fund."

Mr. Nguyen Quang Thuan - Chairman and General Director of FiinGroup Joint Stock Company - said: "Although I do not want to encourage Vietnam Social Security to invest in stocks and bonds, however, according to international practice, Pension funds can consider investing through other financial institutions such as fund certificates at certain and appropriate rates. Invest a small percentage in corporate bonds with high to very high credit ratings or low to very low risk like some countries in the region.

Vietnam Social Security can research investing in bonds of enterprises that are controlled by the State and have high credit ratings. This solution is very beneficial instead of the current high interest rate international loan or bond option. Finally, direct investment in stocks is limited but you can invest in licensed investment funds with proven capacity and appropriate risk appetite (fund of fund model). funds)”.