Date : September 2016 Social Security Reform in Indonesia Agus Susanto President Director
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Date : September 2016
Social Security Reform in Indonesia
Agus Susanto President Director
INDONESIA SNAPSHOT The Archipelago
Key Facts (2015) Regional location : South East Asia Capital : Jakarta Official languages : Bahasa Area : 1.919.440 sq. km (15th) Population : 257,56 million (4th) Annual GDP growth : 4,79%
Life expectancy : 68,62 (M) and 72,69 (F) Dependancy Ratio : 7,59% (old-age) Total Fertility Rate : 2,36 Labor Force : 120,38 million Unemployment Rate : 6,18% Labor Unions : 7.300
2
3
Labor Demographic
Total 120.6 mio workers
Formal 50.3 mio workers
(42%)
Informal 70.3 mio workers
(58%)
Image originally designed by freepik.com
Source : Laporan Bulanan Data Sosial Ekonomi, Badan Pusat Statistik Indonesia, 2015
4
Indonesia Snapshot Indonesia Demographic Overview
% 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%
Demographic overviews and projection indicate the total potential number of social security coverage and should be well managed to achieve financial sustainability.
2.65 2.41
1.78 1.40 1.21
00.5
11.5
22.5
3
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
Population Growth Rate
128.36 Mio
127.09 Mio
5
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)
Program Reform
Indonesia Social Security Scheme has been reformed Since 2014.
What is BPJS Ketenagakerjaan
BPJS Ketenagakerjaan (Social Security Administrating Body for Employment)
Legal Basis : Law No. 40/2004 and Law No. 24/2011
Status : Public Entity
Type of Organization : Social Security Institution
Direct Reported to : The President of the Republic of Indonesia
Mandate : To provide basic protection for all workers : Old-Age Benefits Employment Injury Benefits Death Benefits Pensions Benefits
Coverage : All workers both of formal and informal.
Total memberships 20 mio
Branch Office : 335 Offices Nationwide
Nett Assets : IDR 234 Trillion
Resources : BPJS Ketenagakerjaan, June 2016
Vision : To be a national pride social security organization, trusted, well governed, and excel in operational and services.
Social Security Organizations in Indonesia
7
Public Organization
SOE
Insurance Company
Pension Fund
Taspen 1,18 mio members
ASABRI 4,40 mio members
General Insurance 76 companies
Life Insurance
Pension Institution 260 institutions
BPJS Kesehatan (Health) 156 mio members
BPJS Ketenagakerjaan (Employment) 20 mio members
Sumj;ber: PBasedublikasi Daftar Perusahaan Asuransi OJK. Laporan Pengelolaan Program BPJS Kesehatan.
40 companies
No later than 2029 BPJS Ketenagakerjaan, BPJS Kesehatan, Taspen, ASABRI will be merged
Indonesia National Pension Structure
8
Membership Program DB/DC Funding Administrator
Military Compulsory 1. Pension plan 2. OAS 1)
1. DB 2. Endowment
1. Fully funding 2. Fully funding
1. ASABRI / TASPEN 2. ASABRI / TASPEN
Civil Servant Compulsory 1. Pension plan 2. OAS
1. DB 2. Endowment
1. Fully funding 2. Fully funding
1. TASPEN 2. TASPEN
Formal Workers
Compulsory 1. SS Pension 2. OAS
1. DB 2. Provident
Fund / DC
1. Partially funding
2. Fully funding
1. BPJS Employment
2. BPJS Employment
Informal Workers
Compulsory OAS Provident Fund / DC
Fully funding BPJS Employment
Formal Workers
Voluntory Occupational Pension
1. DB 2. DC
1. Fully funding 2. Fully funding
1. EPF 2) 2. EPF / FIPF 3)
Informal Workers
Voluntory Individual Pension
DC Fully funding FIPF
1) Old-age saving 2) Employer Pension Fund 3) Financial Institution Pension Fund
MEMBERSHIP AND PENSION REFORM
BPJS Ketenagakerjaan
10
Pension Benefit BPJS Ketenagakerjaan
11
Pension Benefit BPJS Ketenagakerjaan
Indonesia’s Social Security Pension System Administering by BPJS Ketenagakerjaan (BPJS Employment)
12
Old-Age Saving
Provident fund (Defined
Contribution)
Lumpsum Payment
Contribution 5,7% (2% EE +
3,7% ER)
No ceiling wages
Fully funding system
SS Pension
Plan
Defined Benefit: 1% x
years of contributions x
ICA + indexation
Annuity (old-age, invalidity,
survivor)
Contribution 3% (1% EE + 2%
ER)
Pensionable age 56
Partially funding
system (pre-funding)
Factors that influencing the sustainability of the SS Pension Fund: demography structure, compliance, investment, and scheme design.
Factors that influencing the sustainability of the OAS Fund: investment, and compliance.
2015 reform
SS Pension and OAS Fund as of July 2016
13
SS Pension Fund Old-Age Saving Fund
Active Members 8,37 mio 13,51 mio
Non-Active Members 24,25 mio
Asset IDR 7,74 trio IDR 203,34 trio
Contributions IDR 5,07 trio IDR 18,02 trio
Claims IDR 56,57 bio IDR 8,68 trio
SS Pension Membership OAS Membership
Common Issues in Social Security
14
Ageing Population
ISSUES
INDONESIA: 1. Low Coverage 2. Benefit Inadequacy
Economic Crisis
Low Coverage
Benefit Inadequacy
Benefit Degradation
Life expectancy M / F : 66,67 / 73,88 (2015) 72,26 / 76,69 (2020) Fertility (TFR) : 2,22 (2015) 1,98 (2030) Old-age dependancy ratio : 7,71% (2015) 12,38% (2030)
Source: UN – World Population Prospects
Members : 13,51 mio (OAS) / 8,37 mio (PENS) out of 45,56 mio formal workers
High Informal Workers
59,40% of workers are infornal workers
Strategies to cope the SS Pension & OAS Issues
15
Ageing Population
STRATEGIES
Economic Crisis
Low Coverage
Benefit Inadequacy
Benefit Degradation
Increasing pensionable age until 65 (starting from 2019, pensionable age increase 1 year every triennium)
Community development
Synergy with private insurance and pension fund industry
Harmonize all regulations regarding pension benefits
High Informal Workers
Develop registration mechanism to “formalize” informal workers
Start with the OAS Start with the selective sector
Create link between SS Pension & OAS Funds with national economics that mutually support
Benefit indexation
Resilience Fund
Current Premium
3% Resilience to Finance
2083
Defined Benefits
How to keep it sustained?
Image originally designed by freepik.com
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 contribution periodically, for instance adjusting
0,3% every triennium based on the research. 5. Redesigning the pension scheme and benefits by considering
Intergenerational Faireness and Equity : Demographic Structure Number of young participant that is still productive Number of participant towards retired.
Pension Programs across Countries
17
Sources: OECD (2013), Pensions at a Glance 2013 : OECD and G20 Indicators, OECD Publishing
Negara Pekerja Pemberi Kerja TotalIndonesia Manfaat Pasti 1,00% 30,00% 1,00% 2,00% 3,00%Austria Manfaat Pasti 1,73% 51,90% 10,25% 12,55% 22,80%Belgia Manfaat Pasti 1,33% 39,90% 7,50% 8,86% 16,36%Kanada Manfaat Pasti 0,64% 19,20% 4,95% 4,95% 9,90%Finlandia Manfaat Pasti 1,50% 45,00% 7,05% 17,75% 24,80%Perancis Manfaat Pasti/Poin 1,16%/0,51% 43,80%/15,30% 6,80% 8,45% 15,25%Jerman Poin 0,97% 29,10% 9,50% 9,50% 19,00%Yunani Manfaat Pasti 0,8-1,5% 24,00%-45,00% 6,67% 13,30% 19,97%Italia NDC 1,46% 43,80% 9,19% 23,81% 33,00%Jepang Manfaat Pasti 0,55% 16,50% 8,74% 8,74% 17,47%Korea Manfaat Pasti 0,87% 26,10% 4,50% 4,50% 9,00%Belanda Manfaat Pasti 1,85% 55,50% 4,90% 4,90%Norwegia NDC 0,94% 28,20% 8,20% 14,10% N/APolandia NDC 0,91% 27,30% 9,76% 9,76% 19,52%Portugal Manfaat Pasti 2,00%-2,30% 60,00% - 69,00% 6,40% 13,80% N/ASpanyol Manfaat Pasti 1,82% 54,60% 4,70% 23,60% 28,30%Swedia NDC 0,95% 28,50% 7,00% 11,40% 18,40%Turki Manfaat Pasti 1,68% 50,40% 9,00% 11,00% 20,00%Inggris Manfaat Pasti N/A N/A 9,05% 11,90% 20,95%Amerika Manfaat Pasti 0,75% 22,50% 6,20% 6,20% 12,40%
Konversi TPP (masa iur 30 tahun)
IuranFaktor ManfaatJenisCountry
Classification Benefit Factor TPP Conversion (30 years
contribution)
Contribution
Workers Employer Total Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
Defined Benefit
NDC
NDC
NDC
POIN
BPJS KETENAGAKERJAAN ROLE TOWARDS SDG’S
19
Sustainable Development Goals 2030
Social security play a vital role on the SDG’s through achieving universal coverage.
20
Social Security role on SDG’s No Poverty Strategy
SME Loan (KUR)
No Poverty
Additional Benefit
Community Empowerment
Ultimate Goal Expansion Social Security Coverage
(Universal Coverage)
Expansion to Vulnerable Workers
(GN Lingkaran)
21
Social Security role on SDG’s No Poverty Strategy
SME Loan (KUR)
Community Empowerment
BPJSTK Additional Benefit
Expansion to the Vulnerable Workers (GN Lingkaran)
• BPJSTK member (target market) • Partnership with the bank • Low rate credit to empower small medium enterprises
• Disability • E-commerce • BPJSTK Ambassador
• Food benefit • Housing benefit • Outdoor Free Wi-Fi
• Expansion to vulnerable workers through crowd funding from mutual cooperation and togetherness.
• Coverage expansion for the vulnerable Informal workers through CSR Fund, Donation
• Digitalize donation scheme, donator appoint Vulnerable workers directly
22
GN Lingkaran A movements for solidarity
A movement to mobilize nation solidarity that addressed to assist social security membership contribution againts Non-Salaried Workers through donation.
Bank Branch
Donations is given directly by Donors through electronic system developed by BPJS Ketenagakerjaan.
The donor is encouraged to choose the beneficiary voluntarily.
The donations is temporary. The workers expected to continue the membership contribution by themselves in the future.
Allocated for three programs as follows: Provident Fund, Employment Injury Death Benefits
How to
donate?
The target
Resources of funds : Recipients / Beneficiary :
Rp
Rp
Rp Rp 1. Government institution 2. Private institution - Corporate Social
Responsibility (CSR) 3. Religious Organization 4. Community Donations 5. Individual Donations 6. Employers
1. Vulnerable Informal Workers 2. Domestic workers 3. Certain Community Groups
Kantor Pusat BPJS Ketenagakerjaan Gedung Jamsostek Jl. Jend. Gatot Subroto No. 79 Jakarta Selatan – 12930 T (021) 520 7797 F (021) 520 2310 www.bpjsketenagakerjaan.go.id
Thank You
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