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Indonesia: Mandatory housing fund contributions to start in 2021

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By Santhi Devi Rosedewayani | June 30, 2020

Indonesia’s new housing fund, intended to help workers purchase, build or renovate their first home, takes effect January 1, 2021.

Employer Action Code: Act

The government has finally enacted the 2016 law on Public Housing Savings (Tabungan Perumahan Rakyat - Tapera) to create a new housing fund (BP Tapera) to be managed by the Tapera Management Agency. BP Tapera is intended to help individuals finance the purchase, construction or renovation of their first home via government-sponsored housing plans. The law will take effect on January 1, 2021, when the fund is expected to begin operation; however, private sector companies will not be required to register with Tapera and contribute to the fund on behalf of employees until 2028, although they may elect to do so voluntarily.

Key details

For companies registered with Tapera, the following rules will apply:

  • All employees between the age of 20 (younger, if married) and normal retirement age (currently age 57) will be required to enroll, subject to a total contribution rate of 3.0% of covered pay (0.5% from employers; 2.5% from employees). The threshold for covered monthly pay is still to be determined. Foreign workers in the country for more than six months will also be required to join.
  • The money will be deposited in individual accounts managed by private investment managers appointed by custodian banks under the supervision of the BP Tapera agency.
  • Participants will have the option to withdraw up to 30% of their fund balance for the purchase of a home or up to 10% for construction/improvements. Qualified account holders with at least 12 consecutive months of contributions will also have the option to take out home loans from the BP Tapera agency at interest rates of no greater than 5% per annum. For the latter option, the government has set aside 2.5 trillion rupiah (Rp) (approximately US$175 million) to launch the agency and fund the loan program.
  • Membership in the program will end at normal retirement age, or five years after having stopped participation as a result of leaving the workforce if earlier, or in the event of death. On termination of membership for whatever reason, a lump sum settlement of the member’s account (plus accrued interest) will be payable to the member (or designated beneficiaries in the event of death).

Employer implications

Currently, 40% of companies in Indonesia surveyed by Willis Towers Watson provide loans to employees; over half (58%) are housing loans expressed in fixed amounts (ranging at the median from Rp300 million to Rp900 million, depending on employee level) or multiples of base salary (45 to 48 times at the median). We do not expect the implementation of BP Tapera to significantly affect employer practices on company loan programs for the foreseeable future due to the relatively low funding rate and voluntary nature of participation. The PAG-IBIG Housing Fund in the Philippines, established in 1978, has a similar level of funding, but 37% of companies surveyed there still provide loans for employees, though somewhat less so for housing.

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