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View all search resultsBusiness groups fret over planned mandatory pension program
The proposed program would require workers earning above a certain amount to enroll in an additional pension fund program.
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Office employees walk along Jl. Sudirman in Jakarta on May 30, 2024. (Antara/Muhammad Adimaja)
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usinesses have raised concerns that a planned mandatory pension program for employees would put undue pressure on companies and eat further into formal workers' salaries.
Financial Services Authority (OJK) head of insurance, guarantees and pension funds Ogi Prastomiyono said on Sept. 3 that the government was preparing an implementing regulation on the new pension rules slated for enactment next year.
The regulation would require workers earning above a certain amount to enroll in an additional pension fund program, he said. It would also specify the percentage of monthly wages that would be paid into the fund and would name the organization responsible for managing the program.
The scheme was introduced under Law No. 4/2023 on financial sector development and strengthening (P2SK) with the aim of expanding the financial services industry. The OJK hopes for the pension fund to grow to around 20 percent of GDP by 2028 from last year’s 6.73 percent, according to its five-year road map.
Employees in the formal sector already face regular obligations that cut into their monthly salaries, namely to the Workers Social Security Agency (BPJS Ketenagakerjaan), which takes 3 percent of formal employees’ monthly wages, and to the Health Care and Social Security Agency (BPJS Kesehatan), which takes 1 percent.
Part of the payments to the former program already go toward retirement pensions for workers.
Employers, meanwhile, must make contributions of 5.7 percent and 4 percent of their employees’ monthly salaries to the respective agencies.
