The government and related authorities realize the need to develop Indonesia's pension fund industryJakarta (ANTARA) - The protection coverage for Indonesia's retired population is still very low despite various pension programs already existing in the country for quite some time, Finance Minister Sri Mulyani stated.
"The government and related authorities realize the need to develop Indonesia's pension fund industry," the minister noted during the 2022 Indonesian Financial Group (IFG) International Conference here on Monday.
The low protection coverage for retirees is inseparable from the presence of at least four challenges faced by the country's pension industry.
These challenges comprise low participation, low contribution, non-optimal investment management and policies, and early withdrawal.
Low membership in the retirement system is reflected in the fact that only 40.2 percent out of the 53.1 million Indonesian formal workers participating in the program.
In fact, the participation of informal workers was almost non-existent or very less.
The low protection for retirees is also apparent from the low dues. Obligatory contribution for the pension program is only 8.7 percent from the national security system and only eight percent for the state officials pension program.
"It needs to be noted that the eight-percent contribution for the state administration is calculated based on the basic salary, which is actually only half of the actual take-home pay," Mulyani explained.
This condition will be causal to a small replacement ratio when workers reach the retirement age, far below the ratio standard of 40 percent, she stated.
On the other hand, a strong pension system is inseparable from the problem of management, whether it is the management of institutions or capital investment policies.
Strong management will produce an efficient, effective, and reliable pension program.
Moreover, good investment policies can improve the pension program's resiliency and, in the end, can bolster the retirement benefit that members can enjoy, the minister remarked.
A strong pension system design has to ensure that the benefit of the pension can be given to members once they reach the retirement age.
"To address all those problems, a pension system reformation design in Indonesia is expected to be able to attain an optimal balance point between sufficiency, affordability, and sustainability of the retirees' protection," Mulyani remarked.
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Translator: Agatha Olivia V, Fadhli Ruhman
Editor: Sri Haryati
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