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AKARTA: Small pension funds face difficulties investing more in government debt papers (SBN) as required by Financial Services Authority (OJK) regulations.

Indonesia Pension Funds Association (ADPI) chairman Mudjiharno M. Sudjono said pension funds with assets less than Rp 200 billion (US$15.2 million) could not easily meet the requirement to invest at least 20 percent of their portfolio in SBN as stipulated by OJK Regulation No. 1/2016 on SBN investment for non-banking financial institutions.

"Their current SBN portion is only zero to 5 percent. It's very difficult to reach 20 percent," he told The Jakarta Post recently. "Small pension funds usually invest in property, deposit and stocks. It's hard to switch from property to SBN. They need to sell them first to be able to do so.”

Mudjiharno explained that industry-wise, SBN had reached a 20 percent portion, mainly helped by the significant SBN investments of big pension funds, such as those under state-owned pawn shop Pegadaian with 40 percent SBN portion.

The SBN rule Article 5 stipulates the heaviest penalty for institution management failing to fulfil the portion as termination from executive position. ADPI comprises 231 pension funds, only 70 of which are active with investments worth at least Rp 198 trillion. — JP/rbk