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Indonesia Hopes to Provide Enough Safety Net
Working individuals in Indonesia now are better off when they retire one day. In 2015, Indonesia made it compulsory for private sectors to enrol employees into the national pension system. This is a piece of additional good news for private-sector employees who are already required to contribute to the Old Age Security Program. As of 2019, the Indonesia retirement age stands at 57 years old. But the government expects it to increase by one year every three years. Currently, the forecasted maximum retirement age will be 65 years old.
The National Pension Program
The pension program was already in place all these years, but it was meant for the public sector. The private sector only had the Old Age Security Program, similar to a social security insurance scheme. Now, all sector employees, excluding the civil services industry, can reap retirement benefits through two retirement funds. The Pension Program is mandatory for all employers and employees to contribute to the fund. Employers will contribute two per cent of monthly employee salary, and the employee will contribute one per cent. Employees can only obtain the full benefit of the pension program after contributing a minimum of 15 years. Otherwise, retirees can only get the total accumulation of contribution plus its growth. Upon Indonesia retirement age, the retirees will begin to receive pension pay-outs monthly. The payments will discontinue when the individual passes away. The pension program also covers for widow or widower, children, parents and disability. Once the retiree individual passes away, the spouse may claim the pension benefits until they pass away or remarry. A child may receive the pension when both parents pass away and will only receive payouts until the child reaches 23 years old, or gets a job or marries. Parents pension are paid to the deceased retiree’s parents when there is no spouse or child in knowledge. A disability pension is paid to individuals that need to retire from the job due to total permanent disability. It is paid until the individual is no longer disable or when he or she passes away.
Old Age Security Program
The other retirement fund employees have to contribute is the old age security program. The program is very much similar to a social security insurance scheme. The program benefits are paid in lump-sum upon reaching Indonesia retirement age, suffers a permanent disability, passes away or permanently leaves the country. When the employee passes away, BPJS will pay the lump-sum amount to the legit heir. Otherwise, if there is none, the payable will go to immediate siblings or in-laws. It can also go to any beneficiary the individual has appointed.
Any employers found not contributing to any of the funds, or delaying contribution, the organisation in charge which is the Badan Penyelenggara Jaminan Sosial (BPJS), will issue a written warning a fine and withdrawal of specific public services. Employers will be held responsible for paying up the penalty of two per cent of monthly contribution for each month of delayed payment.