The Ministry of Finance projects that around 100 million Indonesians may face retirement without pension savings by 2038. This condition is considered a serious alarm for the national labor system. Several factors contribute to the public’s lack of pension savings: most people set aside only about 3 percent of their income, whereas financial security standards recommend at least 10 percent.
Meanwhile, the current pension security scheme still has limited coverage, particularly for the informal sector. As a result, many people struggle to meet basic needs, become dependent on others, and place pressure on the national social security system. Therefore, efforts are needed to improve financial literacy and encourage awareness of saving for retirement from an early stage.
A labor expert from the Faculty of Economics and Business Universitas Gadjah Mada (FEB UGM), Qisha Quarina, Ph.D., said that pension coverage in Indonesia remains very limited and has yet to reach the majority of workers. By design, the pension security program within BPJS Ketenagakerjaan (Indonesia’s social security agency for workers) is intended primarily for wage earners or formal workers.
“However, Indonesia’s labor market structure is still dominated by informal workers,” she said on Tuesday (Mar. 10).
According to data from the National Labor Force Survey (Sakernas) in August 2025, the number of formal workers in Indonesia was around 61.8 million. However, data from the Ministry of Manpower show that as of August 2025, active participation in the pension security program stood at around 15.2 million participants.
“This means that even among formal workers, coverage has not yet reached 25 percent,” she added.
Qisha said this condition indicates that pension-based old-age protection remains limited. In fact, pension security is a long-term instrument to ensure that workers still have economic support when they reach non-productive age.
“If people are not covered by pension security and are no longer able to work, the question is how they will maintain a decent standard of living. If they are still strong enough, they might return to the labor market. But if not, there is a risk of poverty in old age,” she said.
She added that this phenomenon is particularly likely to affect informal workers. Informal workers, or non-wage workers, are the most vulnerable group because they lack pension protection. Under any existing scheme design, they are generally not included in the pension security system. Some workers may have access to the Old-Age Security program (JHT), but the funds can be withdrawn before retirement age, such as when changing jobs. As a result, the funds are often no longer available in the expected amount when individuals actually reach retirement age.
“I see that the pension security scheme is still oriented toward formal workers. Even in the formal sector, not everyone is covered. So there is a design bias in the system toward wage earners,” she explained.
Qisha believes the effectiveness of the current employment social security system cannot yet be fully measured in terms of beneficiaries’ welfare. Available data generally reflect only participation numbers, not the real impact on welfare after benefits are disbursed.
“There is still no comprehensive secondary data measuring whether the withdrawal of JHT or other benefits actually improves recipients’ long-term welfare,” she explained.
According to her, there is also a risk of fiscal pressure and a generational burden. Although the impact may not yet be significant, Qisha reminded that Indonesia is entering a pre-aging society phase, and within the next two or three decades, a large wave of the productive-age population will reach retirement age.
“If projections continue like this and they do not have adequate social security, the government will ultimately need to intervene through social assistance programs, such as elderly benefits under the Family Hope Program (PKH). The burden could then shift to younger generations through taxation. This is what is referred to as a generational burden,” she explained.
Without policy reform, Qisha expressed concern about the future of those who lack adequate protection in old age. She warned of the potential rise in elderly poverty and intergenerational burdens, which could become serious challenges for Indonesia’s national social protection system in the future. Once again, she emphasized the need for policy reform, including the initiative to revise the National Social Security System Law (SJSN), which is currently supported by various stakeholders, including the International Labour Organization (ILO).
“The reform of the SJSN Law needs to be seriously discussed with the government. The scheme, financing design, and system structure must be carefully considered so that Indonesia can develop a more universal pension system in the future,” she said.
Reporter: Kurnia Ekaptiningrum / Public Relations FEB UGM
Author: Agung Nugroho
Post-editor: Zabrina Kumara
Photo: Kompas.com