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July 2020
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Indonesia's new mandatory public housing savings plan draws praise, brickbats

Jakarta, Indonesia capital city, modern buildings with villages like housing structure right in the centre of the city
By Goh Thean Eu  
June 16, 2020

Indonesia recently launched a mandatory scheme for public and private sector employees to save and buy affordable homes and bolster their retirement safety net, but reaction so far is mixed.

Employees have to contribute 2.5% of their monthly salaries to the scheme, called Tapera, while employers have to contribute 1%.

The scheme, which was launched on June 4, is managed by BP Tapera, a new public housing agency.

Part of members’ contributions will be used to build up to one million affordable homes a year, and the rest will be invested in other assets to generate returns for members.

Members can withdraw all or part of their savings to purchase a home, otherwise their full savings can only be taken out when they turn 58 years of age.

It’s a "very useful" scheme for those who don’t own a house and don’t have enough savings to purchase a property, according to Heryadi Indrakusuma, director and chief business development and advisory officer at Manulife Asset Management Indonesia.

"Through this programme, they finally will be required to allocate some of their income to start saving and investing for home ownership," Mr. Heryadi tells Asia Asset Management (AAM).

But according to the country’s biggest workers’ union, it will "put a heavy burden" on employees who already have to make compulsory contributions to a national healthcare programme and a social security scheme.

The addition of Tapera means more than 8% of a worker’s salary will be deducted for the three schemes. The All-Indonesia Workers Union Confederation says in a statement on June 13.

"Tapera's mandatory contribution would be an added burden on workers," the union says, arguing that participation should be voluntary.

According to a fund manager at an Indonesian asset management firm, the government should instead consider a single or universal pension system that addresses all of a worker’s needs, along the lines of Singapore’s Central Provident Fund (CPF).

"It can be something like the one in Singapore, where the members of the CPF can take their savings for various purpose, from investing to housing to healthcare," the Jakarta-based manager tells AAM, speaking on condition of anonymity.