pension program and old age benefit system in...
Post on 09-Aug-2019
214 Views
Preview:
TRANSCRIPT
KEMENTERIAN KEUANGANREPUBLIK INDONESIA
Pension Program and Old Age Benefit System in Indonesia
Washington DC, 6 May 2016
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Raja Ampat islands
Borobudur temple Bali
Mount Bromo
Bunaken Marine ParkSamarinda Mosque
Toba Lake
Indonesia
The total area : 5,193,250 km2Population 2015 : ±255 M The number of islands : ±17.504The number of Tribes : ± 300 (sub tribe 1340)The number of languanges : ± 15 (sub language 546 )
GDP 2015 : $862 BPopulation over age 65 : 5,4% of Population Public Pension Spending : 7,9% of GDPLife expectancy : at birth 70.7
at age 65 14,2
4
% population aged 65 and
older : 5,01%
Ages 0 – 64 :
94,99%
% population aged 65
and older : 9,23%
Ages 0 – 64 :
90,77%
% population aged 65
and older : 15,78%
Ages 0 – 64 :
84,22%
*) in 000.000 (hundred thousands)
(in million)
2000 2010 2030 2050
Population 208,94 240,68 293,48 321,38
0 - 14 64,06 71,79 65,50 60,69
15 - 64 135,13 156,83 200,90 209,96
65 - up 9,75 12,06 27,09 50,72
Dependency Ratio
Old-age 7,21% 7,69% 13,48% 24,16%
Total 54,62% 53,47% 46,09% 53,06%
Indonesia‘s Demographic Structure2010-2050
5
Expenditures Profile - Indonesia
5
The data of the expenses per family in retirementstill show a trend of high epenses
The Expenses* Before and After Retirement per Family
Before retirement
After retirement
% of expenses after retirement
Source: Adapted from BPS – National Social Economic Survey
*) Exclude health expenses
6
Indonesia’s
Social Security
Administrators
Health protection for
all citizens of Indonesia
Protection for all workers in Indonesia
(Law no. 24/2011)
Death Benefit (JKM)
Old Age Saving (JHT)
Occupational Accident
Benefit (JKK)
Pension Benefit(JP)
Indonesia Social Security Scheme has been reformed since 2014
7
Business modelAdopting Trustee Model
7
Invested assets
Social Security Fund (SSF)
BPJS Fund
1. Operating expenses2. Goods and services procured3. Enhancement in delivering
services capacity• Services provider; and/or• Participants
Investment
1. Participants2. Employer3. Government
Investment
Invested assets
principle + yield principle + yield
Management Fee
Contributions
Benefits and Expenses
Expenses
Government(financer of the last
resort)
8
Implementation of Retirement Benefit System
04/20/1992
Civil servantPolice/army
Civil servantPolice/army
Voluntary
01/01/2014 07/01/2015
Civil servantPolice/army
Voluntary
Public Old Age Benefit,Working accident benefit, Death BenefitHealthcare
Civil servantPolice/army
Voluntary
Public Old Age Benefit,Working Accident benefit, Death Benefithealthcare
Public Pension Program
The Law No 40 Year 2004 on Nasional Social Security System
9
Retirement Benefit
Mandatory
Civil Servant
PT Taspen
Old Age Benefit
(DB)
Pension Program
(DB)
Policy&Army
PT Asabri
Old Age Beneft
(DB)
Pension Program
(DB)
All Workers
BPJS Employment
Old Age Benefit
(DC)
Working Accident Benefit
Death Benefit
Pension Plan
(DC+DB)
Voluntary
Workers (State Owned Ent. & Private Co.) & Self- employed
Employer Pension Fund
[259 EPF]
(DC&DB [80% DB]
Financial Institution PF
(DC)
[25: Bank & Life insurance]]
10
Pension Age
Pension Program (Annuity)
Early Retirement Normal Pension Age (NPA) Deferred Pension Age
Mandatory Civil Servant 50 and YoS 20 58 & 60
Army Forced 50 and YoS 20 58 & 60
Public 56, increase 1 year in every 3 years until reach age 65
Voluntarily EPF 10 Years before NPA 55 Maks 60
FIPF 10 Years before NPA Start at 40 to 55 Maks 60
Old Age Benefit(Lumpsum)
Early Retirement Normal Pension Age (NPA) Deferred Pension Age
Mandatory Civil Servant 50 and YoS 20 58 & 60
Army Forced 50 and YoS 20 58 & 60
Public 5 YoC (Govt Regulation) or1 month after lay-off
56 Gradually increase to 65
11
Benefit Formula
Old Age benefit(Lumpsum)
Pension Program(Annuity)
Mandatory Civil Servant 0,55 x YoS x Basic Salary 2,5% x YoS x Basic Salary
Policy/Army 0,55 x YoS x Basic Salary 2,5% x YoS x Basic Salary
Public 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 + 𝑅𝑂𝐼
If Participation < 15 years:
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 + 𝑅𝑂𝐼
For Participation ≥ 15 Years:1% x YoC x (Index Carrer Average, indexed to inflation (maks salary ± $700)
Maks Benefit: ±$300Min Benefit: ±$ 30
Benefit Indexed to inflation
Voluntarily
EPF (DB)
[1% – 2,5%] x YoS x Basic Pension Salary (some PF use full- salary)
Maks: 80% of Basic Pension Salary
EPF & FIPF (DC) 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 + 𝑅𝑂𝐼
12
Financing
Old Age benefit(Lumpsum)
Pension Program(Annuity)
Mandatory Civil Servant Govt: PAYG Govt: PAYG
Policy/Army Govt: PAYG Govt: PAYG
Public 3,7% 2%
Voluntarily EPF 5% - 20%
FIPF no limitation by regulation
Employer
Employee
Old Age benefit(Lumpsum)
Pension Program(Annuity)
Mandatory Civil Servant 3,25% 4,75%
Army Forced 3,25% 4,75%
Public 2% 1%
Voluntarily EPF 5% - 7,5%
FIPF no limitation by regulation
13
Assets And Participants
Assets Participants
Mandatory Civil Servant ± $13.2 B ± 6.5 M
Army Forced ± $ 923M ± 1M
Public $14.9B ± 19M
Voluntarily EPF $ 12.5 B ±1.5 M
FIPF $ 4B ±2.5 M
Total labour Force: ±125M
Total Coverage:
±25%
1$=±Rp 13.000
Total workers: ±120.8M
15
The Principles of Balance and Sustainability
15
1
2
3Affordability
Adequacy
Sustainability
Benefit has to be designed so that it is able to be funded by employers and employees
• The benefit has to be able to provide minimum replacement value of suitable income
• The amount of the output (benefit) should be in accordance with the amount of input (contribution rate and period)
Having long-term cost endurance to fund the program (actuarial fund life/AFL) in order to ensure macro economy stability
Image originally designed by www.freepik.com
Imbalance Funding may increase risk of failure on the funding program,
which is shown by the resilience of its life program.
16
A Decent Protection Model
Pension Benefits Old Aged
Benefits
Occupational Pension Benefit
Individual Saving and
other investment
The Law SJSN40/2004 dan
The Law Labour13/2003
Employer SponsorshipThe Law PF 11/1992
Individual Retirement Savings
Basic Benefit(Securing a minimum standard of living and protection)
TOP UP BenefitReserve funds to maintain decent living standards
TOP UP BenefitIndividual supplement
Severance Fund
17
Implementation challengesThe program has just started... (1)
1. Affordability Employers have to face a burden of high contribution for the employee
benefits (about 30%)
2. Adequacy Small replacement rate (average 30%-40% of basic salary)
3. Sustainability
• Aging population
• Demographic dividend at the moment but soon it will aging rapidly
• Low real retirement age
• Investment
• The issue is more on the accumulated fund, how to utilize this fund to boost the economic growth
4. Administration system
• Unique ID and data sharing
The public Old Age Saving program has just started on Januari 1, 2014The public pension program has just started on July 1, 2015
18
Implementation challengesThe program has just started... (2)
5. Public education (low financial literacy)
6. Geographic condition
7. Economic challenges (affected by the global economic slowdown)
8. Unify the fragmented program (civil service and policy/army)
9. Expanding coverage for the informal sector
19
Government’s Concern
Administration’s Concern
Employer’s Concern
Employee’s Concern
Key factors of successful
implemenation
20
Employer’s Concern
• High Contribution
Program %
Public Pension program 2%
Old Age benefit 3,7%
Accident benefit 0.24%
Death Benefit 0,3%
Healthcare 4%
Voluntarily pension program (average)
±12.5%Range: 5% - 20%
Labour Law Severance Reserve(average)
±8%
Total ± 30.74%
21
Employee’s Concern
• High Contribution
• Promised by the Social Security Law No 40 Year 2004
“Public Program should keep decent life of elderly people”
[$170]
Program %
Public Pension program 1%
Old Age benefit 2%
Heathcare 1%
Voluntarily pension program (average)
5%
Total ± 9%
22
Government’s Concern
• During the first years of implementation, sustainability would not be an issue since there is 15 year vesting period
• Yet, periodical actuarial valuation (internal and external) is need to evaluate the balance of contribution and benefit
• Expansion to reach a large participants
23
Post reform plan
• Actuarial valuation • Review the sustainability the program
• Asses the adequacy of benefit and contribution
• Improvement in administration system• Unique ID
• Develop a robust database system merged with other social security program
• Harmonization with other employee benefit (old age saving and severence pay)
25
How to maintain the sustainability of pension program?
1. Massive expansion to reach a large participants (The more participants means the more premium collected).
2. Enforcing the law to employer as a result of strong legal basis.
3. Encouraging unemployed people to be integrated into workplace.
4. Review the amount of premium periodically
5. Redesigning the pension program and benefits by considering Intergenerational Faireness and Equity :
Demographic Structure
Number of young participant that is still productive
Number of participant towards retired.
top related