Jakarta. The Financial Services Authority (OJK) will soon allow investment managers to operate financial institution pension funds (DPLK), expanding their role in managing retirement plans alongside banks and insurance companies.

Ogi Prastomiyono, OJK's Chief Executive for Insurance and Pension Fund Supervision, stated that this change aims to provide more options for managing pension funds, which should improve benefits for participants. He emphasized the need for pension funds to be linked to the retirement age of participants to optimize returns.

The inclusion of investment managers is part of the new Law No. 4 of 2023, which outlines pension fund businesses. Details on how to establish DPLKs will be provided in a new Financial Services Authority Regulation (POJK).

The draft regulation specifies that DPLKs can only offer Defined Contribution Pension Programs (PPIP), a pension plan where contributions are defined in the Pension Fund Regulations, and all contributions and returns are recorded in individual accounts as retirement benefits.

To set up a DPLK, investment managers must meet five general requirements, including having a minimum health rating of 2 for two consecutive years and maintaining a good reputation. Additionally, investment managers must have at least Rp 25 trillion ($1.59 billion) in assets under management, must not have experienced financial deficits in the last three years, and must consistently meet net working capital requirements.

According to data from OJK, pension funds in Indonesia reported an average return on investment (ROI) of 3.54 percent as of June 2024, an increase from 3.41 percent during the same period last year. However, the investment return rate has declined over the past five years, dropping from 8.51 percent in 2019 to 5.87 percent by November 2023.