Securing your twilight years

JAKARTA (JP): To date only some 350 out of millions of companies in this country have established the pension fund DPPK (Employer Sponsored Pension) for their workers to afford them financial security on retirement.

The DPLK (Financial Institution Pension Fund), on the other hand, has less than 0.5 percent of the country's 210 million population as members.

It is estimated that only 6.5 percent of Indonesia's 90 million workers are investing a portion of their wages in pension funds.

Why is this so?

Generally, most Indonesians focus on how to survive this week, this month and next month, at the most.

Some argue that most workers, including the white-collars, in this country are ignorant about the financial security that pension funds offer during retirement. Others say, albeit jokingly, that Indonesians are so serious in their work that they do not have the time to think about retirement. Some believe workers here simply see retirement as a distant, future problem. Today is today.

Only a small number of people realize that being a pension fund member is beneficial. It's a sacrifice indeed, since a portion of the money earned has to saved for the future, which for some people is uncertain.

But if you firmly believed that "today is today", it might mean that you are putting your future financial independence on the line, or if you have any -- your children.

According to Paul Srilaksono, secretary-general of the Indonesian Pension Funds Association (ADPI), whose members consists only of DPPKs, the small number of DPPKs in the country are also due to a lack of will and participation on the part of employers.

"The awareness that employees have the right to proper benefits at retirement is still low among employers," Srilaksono told The Jakarta Post on Friday.

Some employers, he explained, blamed the economic crisis for blocking their plans of setting up a DPPK for their staff.

Is this reasonable?

"Actually, a company can urge their workers to register at DPLKs to secure their future," Srilaksono said. "So, a worker does not need to depend on DPPK for pension benefits."

There is no bureaucratic red tape or complications in setting up a DPPK, he said.

"Just go to the Ministry of Finance. It's so easy," Srilaksono said.

Based on Decree No. 227 issued by the Ministry of Finance in 1993, a company owner/founder has to fill Form A which will be sent to the minister of finance along with several required documents, including papers signed by the owner/founder stating the establishment of the pension fund; the appointment of the fund's executives, supervisors and custodian of the fund's assets; and the investment directive of the fund.

The establishment of a DPLK is regulated in the ministry's Decree No. 228 issued in the same year.

The regulation requires, for instance, a life insurance company which intends to run pension fund services to have, among other things, a good level of solvency in the past two years at least, a healthy investment mechanism, and been in the business for at least five years.

A public bank intending to do the same would have to show that it has been healthy the past two years.

Despite the sluggish economic growth, amid the bickering among Indonesia's political elite, many believe that pension funds would boom in the next few years.

"The awareness of workers' rights and the importance of preparing for one's retirement will be greater than they are today," said Chris Bendl, managing director of Manulife Asset Management Indonesia.

Rather than relying on their employer, he added, "people will increasingly want to take personal responsibility for their retirement security."

Bendl suggested the government could assist the private sector in promoting private pension schemes by enforcing the pension rules stringently and harmonizing interdepartmental legislation such as the Manpower Law on severance pay and the tax department's policies on income taxes, as well as giving the private sector workers the option of opting out of Jamsostek (social security).

A 1997 survey on Asian ideals, including those in Indonesia, by MasterCard, found that 80 percent of the people polled hoped that they would be able to live independently in their own homes when they retire. The survey shows that Asians have changed their perspective of retirement which in the past meant "living together with the children".

So think ahead and make provisions for the future. Don't forget that life actually begins at 45! (K. Basrie and Darul Aqsha)