Difference between Old-Age Security and Pension Security

PERTANYAAN

I am confused, what exactly is the difference between old age security and pension security? Please explain. Thank you.

INTISARI JAWABAN

Before answering the main question about what is the difference between old-age security and pension security, it is necessary first to understand the function of each security. Old-age pension is organized with the aim of guaranteeing that participants receive cash if they retire, experience permanent total disability, or pass away.

Meanwhile, pension security is organized to maintain a decent standard of living when participants lose or reduce their income due to entering retirement age or experiencing permanent total disability. So, what are the differences between both of them?

Please take a look at the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Perbedaan Jaminan Hari Tua dengan Jaminan Pensiun, written by Bernadetha Aurelia Oktavira, S.H. and was published on 26 September 2023.

All legal information available on Klinik hukumonline.com has been prepared for educational purposes only and is general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Social Security Administrator Employment

One form of social protection for all people in order to meet the basic needs of a decent life is through social security organized through a national social security system by the Social Security Administrator (Badan Penyelenggara Jaminan Sosial "BPJS").[1]

BPJS consists of Social Security Administrator for health and Social Security Administrator for manpower.[2] The Social Security Administrator for manpower functions to organize programs like:[3]

1. work accident insurance/security;
2. old-age security (Jaminan Hari Tua/ "JHT");
3. pension security (Jaminan Pensiun/ "JP");
4. death security; and
5. job loss security.

So what is the difference between old-age security and pension? Referring to Article 35 section (2) Law 40/2024 and its elucidation, old-age security is implemented with the aim of guaranteeing that participants receive cash if they enter retirement age, experience permanent total disability, or pass away. JHT is received by participants who have not yet entered retirement age because they experience permanent total disability so that they can no longer work and their contributions stop.

Meanwhile, Article 39 section (2) Law 40/2024 and its elucidation states that pension security is implemented to maintain a decent standard of living when participants lose or reduce their income due to entering retirement age or experiencing permanent total disability. The decent standard of living referred to in this provision is that the amount of pension insurance is able to meet the basic needs of workers and their families.

But before discussing the differences between old-age security and pension security, we will first explain them one by one below.

Old-Age Security

Old-age security is a cash benefit that is paid at once when the participant enters retirement age, passes away, or experiences permanent total disability.[4] Every employer other than state administrators is obliged to register himself and his workers in the old-age security program with the Social Security Administrator for manpower in accordance with the staging of participation and workers have the right to register themselves as participants in the old-age security program at the expense of the employer if the employer has obviously not registered his workers with Social Security Administrator for manpower.[5]

Based on Article 4 GR 46/2015, JHT program participants consist of:

1. Wage earner participants who work for employers other than state administrators, including:

1. workers in companies;
2. workers in individual persons; and
3. foreigners who work in Indonesia for at least 6 months.

 

2. Non-wage earner participants, including:

1. employers;
2. workers in non-employment relationships or self-employed workers; and
3. workers who are not included outside the employment relationship or independent workers who do not receive wages.

JHT benefits are in the form of cash paid if the participant is 56 years old, passes away, or experiences permanent total disability.[6] How much JHT can be withdrawn? The amount of JHT benefits that will be paid in a lump sum is the accumulated value of all contributions that have been paid plus the results of their development recorded in the participant's individual account.[7]

In addition to the benefits previously mentioned, participants receive additional service benefits in the form of housing financing facilities and/or other benefits.[8] These additional service benefits are financed from JHT investment funds in accordance with statutory provisions.[9]

Referring to the Elucidation to Article 25 section (1) GR 46/2015, specifically regarding housing financing facilities in cash is carried out through financial institutions in the form of housing down payment loans (landed houses and flats), home ownership loans (landed houses and flats), simple rental flats and housing renovation loans.

The beneficiary of JHT is a participant in the condition if:[10]

1. participant;
2. one legal wife or husband in accordance with the provisions of laws and regulations;
3. at the maximum of 2 children and if the participant's child is born no later than 300 days after the termination of the marriage relationship of the registered wife or husband is declared valid or after the participant passes away, the child can be registered as a pension beneficiary; or
4. one parent.

Pension Security

Pension Security a.k.a. JP is a social security that aims to maintain a decent standard of living for participants and/or their heirs by providing income after participants enter retirement age, experience permanent total disability, or pass away.[11] This also answers the question when can JP be disbursed? The answer is when the participant enters retirement age, experiences permanent total disability, or passes away.

Meanwhile, the pension benefit is a sum of money paid monthly to participants with a minimum of IDR 300 thousand per month and a maximum of IDR 3.6 million per month.[12] The amount applies to the first payment, because each year the amount is adjusted to the general inflation rate of the previous year.[13]

Referring to Article 2 section (1) GR 45/2015, the intended participants consist of workers who work for state-organizing employers and other than state-organizing employers.

Then, according to Article 14 section (1) and (2) GR 45/2015, the recipients of pension benefits consist of:

1. participants;
2. one legal wife or husband in accordance with the provisions of laws and regulations;
3. a maximum of 2 children and if the participant's child is born no later than 300 days after the termination of the marriage relationship of the registered wife or husband is declared valid or after the participant dies, the child can be registered as a pension beneficiary; or
4. one parent.

Please note that referring to Article 15 section (2) and (3) GR 45/2015, it is expressly stated that starting January 1, 2019, the retirement age becomes 57 years old and then increases by 1 year for every 3 years thereafter until reaching the retirement age of 65 years.

In addition, the types of retirement benefits are:[14]

1. Old-age pension

Old-age pension benefits are received by participants who have reached retirement age and have had a minimum contribution period of 15 years which is equivalent to 180 months.[15]

2. Disability pension

Disability pension benefits are received by participants who experience permanent total disability before reaching retirement age. The determination of permanent total disability is made by an advisory doctor, treating doctor, and/or examining doctor.[16]

3. Widow's or widower's pension

Widow's or widower's pension benefits are received by the wife or husband of a deceased participant. The amount of widow's or widower's pension benefit is calculated as follows:[17]

1. 50% of the Pension Benefits formula for Participants who pass away before receiving the Pension Benefits; or
2. 50% of the old-age Pension Benefits for Participants who pass away after receiving the Pension Benefits.

 

4. Child pension

Child pension benefits are received by the child in the case of:[18]

1. the participant passes away and does not have a wife or husband; or
2. the widow or widower of the participant passes away or remarry.

The amount of child pension benefit is calculated as follows:[19]

1. 50% of the Pension Benefits formula, for participants who pass away before receiving the Pension Benefits and do not have a widow or widower;
2. 50% of the old-age Pension Benefits or Disability Pension Benefits for Participants who pass away after receiving the Pension Benefits and do not have a widow or widower; or
3. 50% of the widow or widower Pension Benefits for widow or widower who pass away or remarry

 

5. Parent's Pension

The parents' pension benefit is received by the parents in the event that the participant passes away and does not have a wife, husband, or child. The amount of the parents' pension benefit is calculated as:[20]

1. 20% of the Pension Benefits formula for participants who pass away before receiving the Pension Benefits; or
2. 20%  of the old-age Pension Benefits or Disability Pension Benefits for participants who pass away after receiving the Pension Benefits.

Article 24 section (1) GR 45/2015 explains that participants who reach retirement age before fulfilling the 15-year contribution period are still entitled to receive all accumulated contributions plus the results of their development.

Difference between JHT and JP

From the description above, we will summarize to make it clearer about JHT and JP what the difference is through the table below:

Differentiator	Old-Age Security (JHT)	Pension Security (JP)
Purpose of Implementation	To ensure that participants receive cash in the event of retirement, permanent total disability, or death.	To maintain a decent standard of living for participants and / or their heirs by providing income after participants enter retirement age, experience permanent total disability, or death.
Participants	Wage earner participants who work for employers other than state administrators, including: workers in companies; workers in individuals; and foreigners who work in Indonesia for at least 6 months.   Non-wage earner participants, including: employers; workers in non-employment relationships or self-employed workers; and workers who are not included outside the employment relationship or independent workers who do not receive wages.	workers who work for state-organized employers; and workers who work for employers other than state administrators.
Pension Benefits	Cash paid if the participant turns 56 years old, dies, or suffers permanent total disability. Participants also receive additional service benefits in the form of housing financing facilities and/or other benefits.	Old-age pension Disability pension Widow's or widower's pension Child pension Parent's pension
Payment	Paid in a lump sum.	A sum of money paid monthly that will continue to be adjusted each year based on the general inflation rate.

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[1] Article 1 number 1, 2, 6 Law Number 40 of 2004 on National Social Security System.

[2] Article 5 section (2) Law Number 24 of 2011 on Social Security Administrator (“Law 24/2011”).

[3] Article 83 number 1 jo. number 2 Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation which amended Article 6 section (2) jo. Article 9 section (2) Law 24/2011.

[4] Article 1 number 1 Regulation of the Government Number 46 of 2015 on the Implementation of the Old-Age Security Program (“GR 46/2015”).

[5] Article 2 section (1) GR 46/2015 jo. Article 13 section (1) Law 24/2011 jo. The Decision of the Constitutional Court Number 82/PUU-X/2012.

[6] Article 22 section (1) GR 46/2015.

[7] Article 22 section (2) and (3) GR 46/2015.

[8] Article 25 section (1) GR 46/2015.

[9] Article 25 section (2) GR 46/2015.

[10] Article 26 article (1), (3), and (5) jo. Article 23 section (1) GR 46/2015.

[11] Article 1 number 1 Regulation of the Government Number 45 of 2015 on the Organization of Pension Security Program (“GR 45/2015”).

[12] Article 18 section (1) and (2) jo. Article 1 number 3 GR 45/2015.

[13] Article 18 section (3) GR 45/2015.

[14] Article 16 GR 45/2015.

[15] Article 19 section (1) GR 45/2015.

[16] Article 20 section (1) and (5) GR 45/2015..

[17] Article 21 section (1) and (2) GR 45/2015.

[18] Article 22 section (1) GR 45/2015.

[19] Article 22 section (2) GR 45/2015.

[20] Article 23 section (1) and (2) GR 45/2015.