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Mandatory pension programs limit space for private funds
Local pension funds had Rp 1.4 quadrillion (US$89.05 billion) in assets at the end of last year, three-quarters of which came from mandatory pension programs.
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Cashing in: Retirees line up to cash their monthly pension fund in Jakarta on Feb. 15, 2011.
(Courtesy of Kontan/Baihaki)
T
he Financial Services Authority (OJK) projects a 10 to 12 percent increase in pension fund assets this year, but the growth is mainly driven by the rollout of mandatory programs, while private players may not stand to gain as much.
Analysts and industry players opined that, despite the high overall target, growth of voluntary pension programs managed by commercial players may resemble that of last year at just below 7 percent.
They argue that the expansion of mandatory programs curbs the growth potential of their commercial counterparts.
Indonesia has several mandatory pension programs managed by different entities. Pension programs for general workers are managed by the Workers Social Security Agency (BPJS Ketenagakerjaan), those for police and military are managed by state-owned PT Asabri, while the civil servants’ program is run by state-owned PT Taspen.
On top of that, there are voluntary pension programs, usually managed by third-party financial firms or specific companies that want to provide benefits for their employees.
The OJK revealed that local pension funds had Rp 1.4 quadrillion (US$89.05 billion) in assets at the end of last year, which marks a 10.7 percent annual increase. Mandatory pension programs controlled three-quarters of the overall assets and outperformed in terms of growth with 12.1 percent, compared with the 6.9 percent rise in assets of voluntary programs.
An OJK regulation issued last year mandates a minimum of 10 years of membership before policyholders may cash out of private pension programs, providing time for funds to be accumulated and increasing the assets of commercial pension funds, OJK head of insurance, guarantee and pension funds Ogi Prastomiyono said during a press briefing in Jakarta on Monday.
