Old-Age Poverty in Indonesia: Empirical Evidence and Policy Options - A Role for Social Pensions

Indonesia in 2013 is an ageing society with an elderly population (60+) of approximately 18 million or eight percent of the total population. Due to continuously low fertility levels, lower mortality and higher life expectancy rates, the number of elderly in the country is predicted to increase to more than 80 million individuals by 2050 who will by then constitute about 25 percent of the total population.

Considering the rise in its elderly population and the low pension coverage, the Indonesian government has shown strong commitment towards raising the number of elderly who have access to formal pensions. In line with a variety of social welfare laws, the National Security Law (SJSN), declarations under ASEAN and commitments to a comprehensive social protection floor policy, Indonesia has endorsed a mutli-pillar approach to providing income support in old age. However, the current reforms associated with the SJSN Law; aim only at providing income support to the future elderly generation - those working age adults that will retire in 15-40 years. While the success of these reforms needs to be demonstrated, there remains substantial scope to address the need for pension coverage among the current elderly population.

Old-Age Poverty in Indonesia: Empirical Evidence and Policy Options – A Role for Social Pensions aims at filling several evidence gaps in the discussion on elderly and old-age poverty in Indonesia. Firstly it provides a detailed and comprehensive picture of the socio-economic circumstances of the current elderly generation. By doing so it provides Indonesia’s first nationally representative poverty assessment on the elderly addressing aspects of education, health and remittances as well as poverty measurement. Second, the report outlines Indonesia’s legal, political and programme commitments to alleviate old-age poverty and contrasts it with recent international experience on pension reform. This report discusses in particular the benefits of social pensions for Indonesia’s elderly, and outlines the pros-and cons of poverty-targeted and universal pension schemes. Finally, the report provides ex-ante simulation results on the poverty and fiscal impacts for selected social pension schemes.