PPPK Pension Fund Scheme Uses Defined Contributions, Here Are the Advantages and Disadvantages News – 1 hour ago

Jakarta, CNBC Indonesia – The government emphasized that government employees with work agreements (PPPK) are now entitled to pension money. This is in line with the mandate stipulated in the ASN Law (UU),

Minister for Administrative Reform and Bureaucratic Reform (PANRB) Abdullah Azwar Anas said the law which will replace Law Number 5 of 2014 mandates equal distribution of welfare for ASN, both civil servants and PPPK, including pension guarantee rights. So, now PPPK will have rights like civil servants.

“PPPK and ASN will be made into one system. They (PPPK) will also be able to retire because in the future the system will be a defined contribution,” said Anas, quoted from his statement, Tuesday (3/10/2023).

Meanwhile, quoted from BKF’s study regarding the design of pension insurance and old age security, the defined contribution design is a design where participants set aside a portion of their income to be invested in an investment instrument and accumulated during their working period until retirement.

Furthermore, when retiring, participants can purchase an annuity product or receive periodic payments from their fund balance. The benefits received by participants are the accumulation of participants’ contributions during their work period and investment results.

In this scheme, program costs are more predictable. Funding for programs with this scheme generally uses the full funding method, where this financing is based on a percentage of accumulated contributions from participants and employers.

However, BKF in its study revealed that pension programs with defined contribution designs have several weaknesses. In this scheme, participants are faced with various levels of risk, including the risk of uncertainty in the amount of pension benefits, investment risk and the risk of increasing life expectancy.

“A proper system of governance, supervision and control is needed to protect participants’ accumulated assets and investment returns,” wrote BKF.

Quoted from the OJK, defined contribution pension benefits can be paid periodically or all at once, if 80% of the pension benefits are above IDR 500,000,000, a sharia annuity/annuity must be purchased (POJK 60/POJK.05/2020).

However, it should be noted that the amount of this pension money depends on the program you participate in.

The amount of defined contribution benefits is calculated by the accumulation of contributions and the results of investment development of pension contributions based on the type of investment chosen by the participant.

[Gambas:Video CNBC]

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