Dragon Capital VietFund Management launches first DC pension plan available in Vietnam
Dragon Capital VietFund Management, a licensed fund manager in Vietnam and part of Dragon Capital Group, has launched the first private sector pension plan for domestic savers in Vietnam.
The defined contribution pension will provide a simple and flexible investment solution combining employer and employee contributions in an investment fund corresponding with the age and risk preference of each participating member.
Currently the only form of pension provision in Vietnam is a defined benefit retirement plan - Vietnam Social Security Fund (VSSF) - provided by the Government. The new defined contribution pension will provide a structure to regularly save during the working life for later retirement income, increase overall pension pots and allow people to enjoy better living standards in retirement compared to one that will be affordable with just the VSSF payment.
There will be three default fund portfolios available:
• Thịnh An Fund: for higher risk profiles targeting an asset allocation mix of 50/50 split between bonds and equities
• Phúc An Fund: a balance between risks and returns targeting an asset allocation mix of 65 per cent bonds and 35 per cent equities
• Vĩnh Nguyên Fund: a conservative investment strategy targeting an asset allocation mix of 80 per cent bonds and 20 per cent equities. This will be recommended for members over 50 years old.
Pension benefits will be locked in until members reach the retirement age required by law for tax fee withdrawal - 60 years for women and 62 years for men. If members wish to withdraw money early then there will be associated financial costs.
The Funds will be professionally managed by a team of experts, executing selective investment in accordance with the strict monitoring process of Vietnam’s Ministry of Finance and the State Securities Commission.
Dominic Scriven, Executive Chairman and Co-Founder of Dragon Capital VietFund Management, says: “Currently, there are more than 55 million people of working age in Vietnam and 13.2 million people participating in the state social insurance plan. Forecasts show that 20 per cent of the population will enter retirement age by 2030, and 30 per cent by 2050. On a global level we have witnessed government pensions becoming stretched as support ratios, the proportion of workers to pensioners, declines. Recognising this issue, in 2014 Vietnam introduced a new Social Security Law designed to proactively combat this imbalance risk ahead of time.
“Culturally, the Vietnamese population has a positive attitude to savings and investments – for a long time this has been mostly in gold and land but the number of new bank accounts has grown exponentially over the last few years and retail investors have been flooding the stock market due to the low interest rate environment. Vietnam is quite similar to the likes of Taiwan, South Korea and India, in how retail savings and investment has developed over the years.
“We have been working to develop this new pension product for a number of years and very pleased to see it come to fruition. We look forward to working with employers to help individuals save and plan more for their retirement so that they don’t have to rely on the state.”