Indonesia’s 2028 pension fund roadmap: Key initiatives

After Indonesia’s Financial Services Omnibus Law was passed in early 2023, the Financial Services Authority (OJK) has now issued its 2024-2028 Pension Fund Roadmap (the 2028 Roadmap).

Previously, we shared our thoughts on two recent regulations issued by OJK in this space (please see our May 2024 bulletin here). The 2028 Roadmap aims to ensure that the pension fund ecosystem remains resilient, while promoting the development and expansion of the pension fund business. 

In this bulletin, we summarise the initiatives to harmonise, digitalise and centralise Indonesia’s pension funds by 2028 as a key factor to support a national funding strategy (the 2045 Long-term National Plan) where the equivalent of 60 percent of Indonesia’s gross domestic product in 2045 should be in funds managed by pension funds. This will also provide stable long-term financing for both government projects and private investments. 

HARMONISATION OF PENSION FUND SYSTEM IN INDONESIA

The 2028 Roadmap recognises that the pension fund system in Indonesia is insufficiently harmonised, with different types of employees (both state and private) enrolled in different programmes managed by different providers. 

OJK proposes a harmonised dual-system where mandatory pension programmes are exclusively managed by state-owned enterprises (eg, BPJS, Taspen and Asabri) while voluntary pension programmes are managed by private providers (ie, employer pension funds and financial institution pension funds). This approach should help each scheme to focus on managing its relevant funds most effectively. 

Products in voluntary pension programmes would be expanded to include employee benefit-related instruments and savings for children’s education, while mandatory pension programmes would exclusively focus on retirement benefits (ie, post-retirement monthly allowances) and a retirement pension (generally, a one-off payment at a designated retirement milestone). 

DIGITALISATION OF SERVICES 

The 2028 Roadmap emphasises the need for the nation to have one centralised platform for participation in pension fund programmes. The roadmap draws on other countries’ experience (including Norway, Spain, UK, Australia, Denmark, and Germany, among others) in managing and deploying one centralised platform. That experience strongly suggests that the platform will be more successful if managed and run exclusively by the government rather than by a public-private partnership. 

Indonesia has a market precedent on this centralised platform, currently being used in the healthcare sector under the name SatuSehat, which was introduced during the Covid-19 pandemic. 

THREE PHASES OF IMPLEMENTATION

There are three phases of implementation:

• Phase 1 (2024–2025), focusing on three aspects: (a) developing quality of human capital, (b) educating the public on the importance of pension programmes, and (c) governance, risk, and compliance. This includes launching certification programmes for personnel and promoting pension funds to the public. By 2025, it is expected that pension funds are managed more professionally and prudently, particularly from a capital management perspective. 
• Phase 2 (2026–2027), focusing on consolidating voluntary pension programmes and digitising services and business processes. This includes (i) the transfer of employer pension fund benefit-defined plans to financial institution pension funds, and (ii) the creation of a national database on pension programmes and participants. 
• Phase 3 (2028 onwards), focusing on evaluating the roadmap’s progress and further developing pension funds as part of the country’s sustainable finance systems.  

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Please reach out to your usual contact if you have any questions on the 2028 Roadmap and its accompanying initiatives.