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HARMONIZATION IN REGULATORY FRAMEWORK FOR PENSION AND SAVINGS
VOLUNTARY VS MANDATORY
ISA RACHMATARWATA
ASSISTANT TO THE MINISTER OF
FINANCE FOR FINANC IAL
SECTOR POLICY
OUTLINE
• Introduction
• Latest development
• Future direction
3
INTRODUCTION
DEMOGRAPHIC CHALLENGES AND OPPORTUNITIES
5
30.66% 29.83% 22.32% 18.88%
64.67% 65.16% 68.45%
65.33%
4.67% 5.01% 9.23% 15.78%
2000 2010 2030 2050
DEMOGRAPHY PROFILE 0 - 14 15 - 64 65 - above
Source: United Nations, Department of Economic and Social Affairs, Population Division (2013)
• How to mitigate the risk of aging population?
• Demographic bonus time to develop savings
• Encourage bigger savings for future retirement
MULTI-PILLAR SYSTEM
6 Source: United Nations, Department of Economic and Social Affairs, Population Division (2013)
Mandatory
Voluntary
Individual
Individual Voluntary
Arranged Voluntary
Mandatory
INDONESIA PENSION SCHEME
7
Mandatory
Civil
Servants
Army forces
(Incl. Police
officers)
Private
tenured
workers
Private non-
tenured
workers
Admin:
PT Taspen
Admin:
PT Asabri
Admin:
BPJS (Old
age savings
& Pension)
Admin:
BPJS (Old
age
savings)
Arranged
Voluntary
Employer/
Financial
Institution
Pension
Fund
Individual
Voluntary
Financial
Institution
Pension
Fund
Financial
Institution
Pension
Fund
Financial
Institution
Pension
Fund
Financial
Institution
Pension
Fund
Source: adapted from OJK, 2016
SJSN / NATIONAL PENSION DESIGN No SJSN Pension
1 Scheme:
•Defined benefit with indexed career average (ICA)
• Start at 1 July 2016
• Financing scheme: Partially Funded
•Accrual rate: 1% for each year of contribution
•Minimum 15 years of contribution
•Benefit formula:
Accrual rate (X%) * number of year of contribution * average salary (ICA, indexed with inflation)
•Targeted replacement ratio (RR): 25%-30%
• ILO recommendation RR is 40%. Another 12%-15% is from Old-age Savings Program (Defined Contribution)
2 Pension Age
The first 3 year: 56 yo
•Automatic adjustment: increase 1 year for every 3 year (starting in 2019) up to 65
•Balancing the accumulating period and spending period (due to aging population)
3 Rate of contribution
• Start with 3% of fixed salary (FS)
•Will increase after considering: national economic condition and the actuarial liability of the program
(ensuring the reserves is always available for the liability, partially funded)
•Employer 2% of FS; Employee 1% of FS
4 Cost of living adjustment (CoLA) / Benefit indexation
• Inflation rate 8
PHK BENEFIT
•Another Post of Retirement Benefit
•Consist of:
• Severance
• Length of service award
•Others benefit
•Actuarial calculation
•7.46% - 11.84% of salary
9
LATEST DEVELOPMENT
192179
48 4425 25
265248
0
50
100
150
200
250
300
Jun15 Dec15 Jun16 Dec16 Feb17
TotalPensionFund
EPF-DBPF EPF-DCPF FIPF TOTAL
EPF-DBPF72.18%
EPF-DCPF17.74%
FIPF10.08%
AsofFeb17
EPF-DBPF EPF-DCPF FIPF
Note:
EPF DBPF = Employer Pension Fund - Defined Benefit
Pension Fund
EPF DCPF = Employer Pension Fund - Defined Contribution
Pension Fund
FIPF = Financial Institution Pension Fund
• The number of
Pension Fund is
decreasing
VOLUNTARY PENSION FUND
11 Source: OJK, 2017
VOLUNTARY PARTICIPANTS STILL GROWING, YET AT A DECREASING RATE
12
2,817,997
4,189,5279.4%
6.7%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2010 2011 2012 2013 2014 2015
EPF-DBPF EPF-DCPF FIPF TOTAL TotalGrowth(RHS)
Source: OJK, 2017
VOLUNTARY PENSION FUNDS ASSET
13
-
50,000
100,000
150,000
200,000
250,000
300,000
Jun15 Dec15 Jun16 Dec16 Feb17
EPF-DBPF EPF-DCPF FIPF TOTAL
IDR Billion
Source: OJK, 2017
MANDATORY (1)
14
13,045,915
13,630,149
13,000,000
13,100,000
13,200,000
13,300,000
13,400,000
13,500,000
13,600,000
13,700,000
SJSNOldAgeSavingsParticipants(active)
6,573,3488,149,941 8,890,305 8,961,367
0
456,060
2,713,964 3,191,555
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
Dec15 Jun16 Dec16 Feb17
SJSNPensionParticipants
Active Inactive
Source: BPJS Employment, 2017
MANDATORY (2)
15 Source: BPJS Employment, 2017
MANDATORY (2)
16 Source: PT Taspen & PT Asabri, 2017
FUTURE DIRECTION
INDONESIA PENSION SCHEME
18
Mandatory
Civil
Servants
Army forces
(Incl. Police
officers)
Private
tenured
workers
Private non-
tenured
workers
Admin:
PT Taspen
Admin:
PT Asabri
Admin:
BPJS (Old
age savings
& Pension)
Admin:
BPJS (Old
age
savings)
Arranged
Voluntary
Employer/
Financial
Institution
Pension
Fund
Individual
Voluntary
Financial
Institution
Pension
Fund
Financial
Institution
Pension
Fund
Financial
Institution
Pension
Fund
Financial
Institution
Pension
Fund
Source: adapted from OJK, 2016
Admin:
BPJS (Old age savings and/or Pension)
Employer/
Financial
Institution
Pension
Fund
Employer/
Financial
Institution
Pension
Fund
INTEGRATING PHK BENEFIT WITH SJSN
• Consist of:
• Severance
• Length of service award
• Others benefit
19
Should be integrated
with SJSN Old-age
savings and Pension
THANK YOU