Tuesday, April 16, 2024 | 15:49 WIB

Savings program for the golden years

Jakarta, IO – The Indonesian population of the elderly is expected to increase, along with a rise in their rate of poverty. The Old Age Security (JHT) and Pension Guarantee (JP) programs, which serve as savings programs for workers during retirement and old age, are not functioning properly, on account of legal substance and structural issues. 

Social security programs such as JHT (Old Age Security Program) and JP (Pension Security Program) are Indonesian citizens’ constitutional rights, serving as state instruments to ensure the entire society’s well-being during retirement and old age. Social security works to reduce poverty and social inequality, by broadening participation and increasing benefits. 

Although both programs are desperately needed and the JHT-JP programs have been implemented for some time, households with elderly members rarely benefit from these programs. Thus, they contribute to a higher rate of elderly poverty. 

Statistics Indonesia (BPS) reports that the elderly population in Indonesia hit 28.9 million people (10.48 percent) in 2022, and this continues to rise. By 2045, it is estimated that the elderly population will reach 55.89 million or 19.9 percent of the total Indonesian population. 

The rise in the population of the elderly will be followed by an increase in the number of poor elderly people. Sadly, to make ends meet, many elderly people must continue working in vulnerable sectors. According to BPS data, 50 percent of the elderly population is still employed, with a significant portion working in the informal sector, due to a lack of education. Among the elderly workforce, 20 percent work more than 48 hours per week. 

Timboel Siregar
Timboel Siregar, Advocacy Coordinator at BPJS Watch/Researcher at INSPIR Indonesia

The aging process results in a decline in body functions and a higher risk of illness. For instance, the prevalence of hypertension hitting the age group of 55–64 years is 55.2 percent, 45.3 percent for the 65–74 age group, and 69.5 percent in the age group above 75 years. Similarly, mental and cognitive disorders, such as dementia, affect 1.2 million elderly people, while 12.8 percent of elderly people are affected by emotional and mental disorders. 

Both social security programs seek to ensure that the entire elderly population can benefit from JHT and Japan, as mandated by ILO Convention No. 102 of 1952, which recommends that social security benefits support the well-being of workers entering old age, by providing a minimum of 40% of their most recent wage. 

The future challenge 

The regulatory issues often result in low participation for JHT (Old Age Security Program) and JP (Pension Security Program), particularly regarding inconsistencies between the National Social Security System’s (SJSN) Law and its operational regulations. The mandatory participation mandated by the SJSN Law and the Social Security Organizing Agency (BPJS) Law are regulated differently in their operational regulations. 

Formal workers’ gradual participation—as stipulated in Presidential Regulation No. 46 of 2015 on JHT and Presidential Regulation No. 45 of 2015 on JP—is not implemented with a definite staging deadline by Presidential Regulation No. 109 of 2013 on the Staging of Social Security Programs. As a result, wage workers in the micro-sector are obliged to participate in JHT, and workers in the small and micro-sectors are obligated to participate in JP. 

Mandatory participation in the SJSN Law and BPJS Law also targets non-wage workers (BPU), Indonesian migrant workers (PMI), and construction services. However, according to Article 13 paragraph (1) of Presidential Regulation No. 46 of 2015, in conjunction with Article 7 and Article 8 of Presidential Regulation No. 109 of 2013, BPU, PMI, and Construction Services’ participation is optional, resulting in the JHT program’s limited number of participants. 

The current JP program is only for PPU, while BPU workers, PMI workers, and construction service workers cannot participate in the JP program yet. The inconsistency between Article 4 of the SJSN Law, about mandatory participation, and Articles 39 to 42 of the SJSN Law and Government Regulation No. 45 of 2015, only accommodates PPU participants in JP. 

All BPU workers, PMI workers, and construction service workers will sooner or later get old, if they do not die first. They will suffer a decline in their physical abilities and skills, forcing them to retire. However, Article 8 paragraph (2) of Presidential Regulation No. 109 of 2013 allows BPU to participate in the JP program, but this regulation has not been implemented until now, preventing BPU, PMI, and construction service workers from becoming JP participants. This is crucial, as the majority of Indonesian workers are in the informal sector, with a lack of social security protection, including JP. 

The JHT benefit disbursement issues appear in the inconsistency between Article 35 and Article 37 of the SJSN Law, with Government Regulation No. 60 of 2015 and Minister of Manpower Regulation No. 4 of 2022. From a legal and hierarchical perspective, Government Regulation No. 60 of 2015, along with Minister of Manpower Regulation No. 4 of 2022, is subordinate to the SJSN Law, allowing workers to withdraw their JHT funds during layoffs; however, it is contrary to Article 35 and Article 37 of the SJSN Law, which is reinforced by Constitutional Court Decision (MK) Number 33/PUUXX/2022, declaring Article 35 and Article 37 of the SJSN Law as constitutional. 

The directive to evaluate the JHT contributions in Government Regulation No. 46 of 2015 has not been carried out by the government until now, resulting in a relatively small JHT balance for retirement at around IDR 56 million, and a median JHT balance of IDR 34 million. 

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Similarly, the directive to evaluate JP contributions, which the government has not executed, involves the JP contribution reaching eight percent. If the government does not address the matter immediately, the JP program may not be sustained in the future, posing a threat to a continuing JP program. 

The challenges involve regulatory improvements and legal certainty to expand JHT and JP participation for all workers in the formal and informal sectors. There is a need to increase the workers’ JHT and JP benefits, which in the end will enable them to have decent retirement and elderly savings, leading to comfortable elderly lives and avoidance of poverty.