Three financial firms embark on pension funding services

JAKARTA (JP): Dharmala Manulife, the life insurance division of the Dharmala Group, yesterday launched its pension plan funding services, becoming the third financial institution to introduce the relatively new product this week.

Adi Purnomo, the vice president of the life insurance company, said yesterday that Dharmala Manulife will offer pension services to both institutions and individuals.

"The market is growing... but we (insurance firms) have to compete with commercial banks in this new business," he said at the launching of the new insurance product.

PT Asuransi AIA Indonesia launched its pension service on Wednesday, following Bank Internasional Indonesia (BII), which rolled off the new product on Tuesday.

BII, the second bank offering a pension service after the state-owned Bank Nasional Indonesia (BNI), will cooperate with Land Lease Corporate Services of Australia to manage its pension fund, while AIA Indonesia will team up with AIG, a U.S. life insurance company.

Adi estimated that more insurance companies and banks will follow suit, tapping into the country's growing pension plan funding business.

Life insurance firms and commercial banks are allowed to offer pension plan funding services under the pension fund law, which was enacted in 1992.

Prospect

"The prospect is very promising, given the continued increase in the country's per capita income," he said of the outlook for the pension plan funding services in the country.

He, however, said that many financial institutions still face constraints in managing their pension funds due to the absence of long-term investment alternatives.

"Bonds mostly carry a maturity period of up to five years. We certainly need a much longer maturity span... such as 25 years, while stock trading is still too speculative," he said of the handicap in investing the pension funds on the capital market.

He considered the government's investment restriction imposed on pension fund managers as "within a acceptable level."

"The restriction is positive in that it protects the public," he said, adding that the limitation still gives pension fund managers ample flexibility over funds.

Dharmala Manulife, 40 percent owned by the Dharmala group, 51 percent by the Manufacturers Life Insurance Company of Canada and nine percent by International Finance Corporation, places over 80 percent of its investment funds in bank deposits.(hen)