Other than private insurance funds subject to private markets, there are three types of pension plans prescribed under the Vietnamese Law on Social Insurances:

Compulsory pension plan - employees and employers are required to jointly contribute to this pension fund. Both the contributions and benefits are clearly defined and uniformly applied to all employers and employees.

Voluntary pension plan - Vietnamese citizens aged 15 years or older and who are not subject to contribution to the compulsory pension fund can participate in this voluntary pension regime.

These two pension plans are managed by the Vietnam Social Insurance Fund and receive the state budget's financial support.  

Supplementary Pension Plan - (i) employers and employees, (ii) employees personally, and (iii) individuals aged 15 years or older who are not working under a labor contract, can participate in this voluntary supplemental plan. This plan was newly introduced in 2016 and is managed by voluntary pension fund management companies. Participation in this plan by employers and employees has not been common in practice.

The purchaser should consider clarifying the status of the target’s compulsory insurance contribution, i.e., whether it has contributed at the statutory rates and for all of its employees to date. If the target has failed to fully contribute in a timely manner to the compulsory pension fund, the target will be compelled to pay the deficit amounts plus interest in late payment, and also be subject to administrative penalties, or even criminal liabilities in extreme circumstances. Accordingly, the purchaser should seek appropriate warranty protection and indemnification to mitigate liability exposure.