Pension and Active Ageing: Lessons Learned from Civil Servants in Indonesia

Aris Ananta, Ahmad Irsan A. Moeis, Hendro Try Widianto, Heri Yulianto and Evi Nurvidya Arifin
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Aris Ananta: Faculty of Economics and Business, Universitas Indonesia, Ul Depok 16424, Indonesia
Ahmad Irsan A. Moeis: Directorate General of Budget, Ministry of Finance, Jakarta 10710, Indonesia
Hendro Try Widianto: Directorate General of Budget, Ministry of Finance, Jakarta 10710, Indonesia
Heri Yulianto: Directorate General of Budget, Ministry of Finance, Jakarta 10710, Indonesia
Evi Nurvidya Arifin: Centre for Advanced Research, Universiti Brunei Darussalam, Bandar Seri Begawan BE1410, Brunei

Social Sciences, 2021, vol. 10, issue 11, 1-17

Abstract: Many developing countries are currently facing an ageing population without sufficient preparation for old-age financial adequacy, an important component in active ageing. One question is whether a pension system can create old-age financial adequacy. At the same time, many countries are shifting their pension systems from a defined benefit to a defined contribution pension system to improve the welfare of older people while maintaining state budget sustainability. Indonesia is not an exception. This paper learns from civil servants in Indonesia, where the retirement payout from the existing pay-as-you-go, defined benefit system is meagre. The system is to be transformed into a defined contribution one. Using a simulation method, this paper examines whether the proposed system will provide a better retirement payout, which is higher than the minimum wage and will allow retirees to maintain their pre-retirement income. This paper concludes that the proposed system alone is not sufficient to create old-age financial adequacy and, therefore, is less able to contribute to active ageing. To improve the retirement payout, among other things, the retirement age should be raised and made optional, and the accumulated savings should be re-invested during the retirement period.

Keywords: active ageing; financial adequacy; pension system; civil servants; standard of living (search for similar items in EconPapers)
JEL-codes: A B N P Y80 Z00 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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