The Ministry of Finance projects that around 100 million Indonesians could potentially have no retirement savings by 2038. This situation is considered a serious warning for the national labor system.
Labor economist from the Faculty of Economics and Business, Universitas Gadjah Mada (FEB UGM), Qisha Quarina, Ph.D., stated that pension coverage in Indonesia remains very limited and has not reached the majority of workers. The pension security programme administered by the Social Security Employment Body (BPJS Ketenagakerjaan) aims to support wage-earning workers in the formal sector. Meanwhile, Indonesia’s labor market remains dominated by informal workers.
Data from the National Labor Force Survey (Sakernas) in August 2025 recorded around 61.8 million formal workers in Indonesia. However, data from the Ministry of Manpower shows that, as of August 2025, only about 15.2 million people were active participants in the pension program.
“This means that even among formal workers, the coverage has not yet reached 25 percent,” she explained.
Qisha said this condition indicates that old-age protection through pension schemes remains minimal. In fact, pension security is a long-term mechanism to ensure that workers maintain economic stability as they reach non-productive age.
“If workers lack pension security and are unable to work, the question arises as to how they will maintain a decent standard of living. If they are still physically capable, they might return to the labor market. But if not, there is a risk of poverty in old age,” she said.
Informal Workers Are the Most Vulnerable
The lecturer from the Department of Economics at FEB UGM explained that informal workers, or non-wage workers, are the most vulnerable group, as they generally lack pension protection. They deliberately opted out of the pension security scheme.
Some workers may be eligible for the Old-Age Security (JHT) program. However, this scheme can be withdrawn before retirement age, for example, when changing jobs. As a result, the funds are often unavailable when individuals actually enter retirement.
“The pension security scheme is still oriented toward formal workers. Coverage is not universal even within the formal sector. So there is a design bias in the system toward wage-earning workers,” Qisha said.
She also noted that the effectiveness of the current social security system for employment has not yet been fully measured in terms of its impact on beneficiaries’ welfare. Available data generally only shows participation numbers, not the actual impact on long-term welfare after benefits are withdrawn.
“There is still no comprehensive secondary data measuring whether withdrawals from JHT or other benefits truly improve the long-term welfare of recipients,” she added.
Risk of Fiscal Pressure and Generational Burden
Although the impact may not yet appear significant, Qisha warned that Indonesia is entering a phase of pre-ageing. In the next two to three decades, a large wave of productive-age populations will enter retirement age.
“If the projection continues like this and they do not have adequate social security, the government will eventually have to intervene through social assistance, such as elderly assistance under PKH. The burden could shift to the younger generation through taxes. It is what we call a generational burden,” she explained.
Without policy reform, she believes the Risk of increasing elderly poverty and intergenerational fiscal pressure will become a serious challenge for Indonesia’s social protection system in the future.
The Need for Reform
Qisha stated that the initiative to reform the National Social Security System (SJSN) Law, currently supported by various stakeholders and the International Labour Organisation (ILO), is an important step.
“The reform of the SJSN Law needs to be seriously discussed with the government. For Indonesia to build a more universal pension system in the future, the scheme, financing design, and system structure must undergo careful development,” she said.
According to her, such steps are essential to ensure that every citizen who has stopped working and entered retirement age still has a minimum income to maintain a decent standard of living. It would also allow them to live without fully depending on family support or social assistance.
Report: Kurnia Ekaptiningrum
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