Pension fund in China not for stock market bail-out: official

Want China Times, Xinhua 2015-08-29

People walking past a pension fund management center in Fuzhou, Fujian
province, June 30. (File photo/CNS)

Allowing China's pension fund to invest in the stock market was not intended as a bail out, but to create long-term and stable returns, said the vice minister of human resources and social security on Friday.

The change will eventually have a positive effect on China's real economy and support a healthy capital market, but the core purpose is to gain long-term and stable yields for the fund, vice minister You Jun said at a press conference.

The fund's management must prioritize safety, and the timing of the fund's entry into the stock market will be decided by the market, You added.

The State Council finalized guidelines on Sunday allowing the pension fund to invest in new products, including the domestic stock market.

The guidelines allow the fund to invest in more than 20 financial products, including high-risk stocks and equities, as well as low-risk bank deposits and bonds, which diversify the investment risk, You said.

To minimize risks, the guideline restricts the maximum proportion of investment in stocks and equities to 30% of total net assets.

The fund will also participate in major projects and purchase shares in state-owned enterprises to gain long-term yields, he added.

Around 2 trillion yuan (US$330 billion) of the funds total assets can be invested, You said, adding that the amount will increase as the fund grows.

China's pension fund, which accounts for roughly 90% of the country's total social security fund pool, had net assets of 3.5 trillion yuan (US$547 billion) at the end of 2014.

The pension fund was previously parked in banks or invested in treasury bonds with low yields, provoking calls for change as China faces the challenge of caring for its growing elderly population.

The new policy came as China's stock markets continue to decline, beset by shrinking turnover and greater volatility. The key Shanghai index plunged more than 30% from its June peak, wiping out most of this year's gains.

"Market-oriented operation of the pension fund requires more market supervision by authorities," said You.

The National Council for Social Security Fund (SSF), a social security strategic reserve for China's future aging population, played an exemplary role in increasing the fund's investment returns. The SSF has had an average yearly return of 8.5% over the past 14 years as of 2014 and outpaces the consumer price index growth.

The SSF has a bigger investment scope than the pension fund and is allowed to invest in domestic and overseas stocks as well as fixed income assets.

In China, private urban employees pay for their pension before retirement and usually get a pension equal to about half of their final salary.

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Anger and Protests as Government Blindsides Public With New Pension Restriction

Jakarta Globe, Ezra Sihite, July 02, 2015

President Joko Widodo inaugurates the state worker pension fund, BPJS
Ketenagakerjaan, on Wednesday. (Antara Photo/Idhad Zakaria)

Jakarta. Thousands of Indonesians have taken to the Internet and the streets in protest at a new government regulation requiring employees and former employees to wait until retirement age to withdraw their pension funds.

An online petition challenging the government’s decision to revise the longstanding regulation on the state-pension fund withdrawal system was launched on Change.org and within less than two days garnered nearly 60,000 signatures.

The petition was initiated by Gilang Mahardika, a Yogyakarta resident who resigned from his job after working for five years.

Gilang had planned to start his own business with his pension fund, deducted from his monthly salary and managed by the Social Security Administration Body for Employment, or BPJS Ketenagakerjaan, which used to be known as Jamsostek.

Gilang, who resigned in May this year, went to a BPJS Ketenagakerjaan office to withdraw his funds only to be told that the rules had changed since the institution began full operations on Wednesday under a new regulation.

“My happiness to finally get the money I planned to use for business ended with a bitter pill,” Gilang wrote.

An official at the BPJS office told him that only those who have been paying into the pension fund for at least 10 years would be allowed to withdraw – and even then, the withdrawal is capped at 10 percent of the total fund. The full fund can only been withdrawn once the policy holder turns 56 years old.

The life expectancy in Indonesia is 70 years.

Previous rules governing the Jamsostek scheme stipulated that the full fund could be withdrawn after five years of paying into the scheme.

Gilang’s online protest spread quickly, with thousands of social media users echoing their disappointment on Facebook and Twitter, and demanding the government rescind the new regulation.

Angry protesters claimed the government was effectively robbing the public with the revised rules.

Despite the outcry, though, Manpower Minister Hanif Dhakiri insisted that the new regulation was in line with prevailing laws.

“There’s no such thing [as] the government taking advantage of the people. This is all about management,” he said on Thursday.

“After 10 years they will be allowed to access 10 percent of funds for miscellaneous necessities and an additional 30 percent for housing.”

BPJS Ketenagakerjaan president director Elvyn Masassya said the new regulation was more in line with the scheme’s intended purpose to provide a pension fund than the previous setup under Jamsostek.

“A pension fund is meant for people who have retired. A 10-year wait is more ideal,” he said on Thursday as quoted by CNN Indonesia. (Yes, Elvyn is a man.) “The funds are still there and can be claimed in full when a worker is 56 years old.”

Democratic Party legislator Dede Yusuf, who chairs the House of Representatives’ oversight commission in welfare, said the new regulation was needed to prevent BPJS Ketenagakerjaan from becoming cash-strapped like its health insurer counterpart, BPJS Kesehatan.

While disgruntled citizens in Jakarta opted to raise a ruckus online, workers in the industrial island of Batam, in the Riau Islands province, took to the streets on Wednesday to protest the new regulation, Batamnews.co.id reported.

Some 200 workers marched on the local BPJS Ketenagakerjaan office demanding to meet with officials there. A scuffle ensued when the workers were denied entry into the office.

The local BPJS office eventually agreed to postpone the implementation of the new regulation until after the Idul Fitri celebration which falls on July 17.

There was a similar protest in Bogor, just south of the capital, where hundreds of BPJS Ketenagakerjaan policy holders protested what they denounced as the government’s negligence in informing them about the drastic change in policy.

The Bogor office said there was nothing it could do to change the rules but to forward the people’s grievances to the BPJS Ketenagakerjaan head office in Jakarta.

Andy Sinaga, of the workers’ rights advocacy group Labor Institute Indonesia, said the regulation went against the spirit of Indonesia’s universal social welfare scheme, which is supposed to work for the benefit of the people.

Andy also said that labor unions and workers’ groups had never been consulted during the drafting of the new regulation. The government, he added, had showed itself to be insensitive toward the impact that Indonesia’s economic slowdown was having on the workforce, including mass layoffs in various industries.

“Workers need cash to survive. With Idul Fitri just days away, there’s an extra need for cash,” Andy said as quoted by Rakyat Merdeka Online.

“President Jokowi must act and revoke this one-sided decision because it victimizes the participants of BPJS Ketenagakerjaan themselves.”

Indonesian Pension Contribution Set to Rise to 8% of Salary

Jakarta Globe, Siprianus Edi Hardum, Apr 09, 2015

Employees' contribution to the pension system could rise to 8 percent
from 5 percent now. (Antara Photo/Fanny Octavianus)

Jakarta. The Indonesian government plans to raise the pension contribution to 8 percent of an employee’s monthly salary starting in July from 5 percent now, said Labor Minister M. Hanif Dhakiri on Wednesday.

The plan is part of a new government regulation draft that aims to revamp the country’s pension system.

“The draft has been finalized. We are only waiting for the harmonization process at the Law and Human Rights Ministry and ratification,” Hanif said.

Hanif did not elaborate on the share of contributions by employees and employers in paying pensions. Currently, employees pay 2 percent of their salary for pension, while their employers pay the remaining 3 percent.

Indonesia started last year a universal pension program under BPJS Ketenagakerjaan, which seeks to cover pensions for all workers nationwide.

The draft includes a clause that requires employees to be in the universal pension program for at least 15 years before making use of the pensions. It also sets the pension age at 56 years old.

GlobeAsia

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Beijing sets occupational pension standards for civil servants

Beijing sets occupational pension standards for civil servants

Want China Times, Xinhua 2015-04-07

A senior center in Yuncheng, Shanxi province, March 19. (File photo/Xinhua)

China announced detailed standards of occupational pension for government employees on Monday as a move to build a multi-level, sustainable pension mechanism.

The welfare fund, as a supplementary part of the basic pension system and commercial insurance, will require a government department to pay 8% of its total salary amount and a government employee to contribute 4% of their taxation-based salary, according to an announcement released by the State Council, China's cabinet.

The benchmark for the payment base is the same with that of the basic pension and the fund sources also include related investment yields and other legal contributions.

The fund will be left to qualified institutions such as securities houses, asset management companies an insurers to manage the pension and conduct investments.

The introduction of occupational pension is expected to retain talent as recent reforms in the basic pension system for government institutions might compromise employee welfare.

China started pilot reform programs in government organizations to require them to pay social insurance and pension funds like other private employers in 2008 to promote social fairness. Before that, government employees only had to pay income tax.