For retirees, pension funds are assets that must be prepared to meet their needs during retirement. Therefore, everyone must prepare themselves financially through the pension fund so that you do not have to burden your children and grandchildren in the future. This pension fund will be an important thing with the aim that later we will become financially independent in old age. For more details about this pension fund, you can read the article below.

What is a Pension Fund?

A pension fund is a legal entity that manages and runs promising programs for retirement benefits. Pension funds are also legal entities that manage and run programs that supply or fulfill the promise of retirement benefits such as regular payments, health benefits, access to certain facilities, and other benefits that can be obtained. This retirement benefit is given to a person who retires based on that person's work before retirement. Retirement benefits for participants that begin to be paid when the retirement participant has reached the normal retirement age or later. Meanwhile, based on Law Number 11 of 1992, the definition of the fund is a legal entity that manages and runs programs with the promise of pension benefits. Thus, it can be concluded that pension funds are funds collected by certain institutions using worker contributions to be given back to workers at the time of retirement.

Benefits of Pension Funds

There are benefits that you can get when using retirement funds. These benefits are divided into pension funds for employees and also for the company. The benefits of pension funds for employees that can be enjoyed are:
  1. There is a definite funding available for old age.
  2. There is a guarantee of income continuity in retirement/old age.
  3. Contributions are booked directly on behalf of the worker.
  4. Contributions to reduce income tax (PPh21)
  5. The investment proceeds are tax-free until the program benefits are paid.
  6. Separate from the wealth of the DPLK organizing company.
Meanwhile, the benefits of pension funds for companies are:
  1. Able to fulfill the obligations of employers to their employees in accordance with Law 13/2003.
  2. It can avoid the company's cash flow problems in the future.
  3. Corporate contributions can reduce corporate income tax (PPh 25).
  4. It has a cheap employee benefits program in terms of financing.
  5. It can be adjusted to the company's conditions, it is flexible.
  6. Become the added value of the company, in addition to retaining quality employees.
  7. Companies do not need to bother managing the pension fund investments of their employees.

Functions of Pension Funds

So that you can prepare for old age well through this, it would be good for you to learn the function of the pension fund itself. This function is divided based on three things, namely the function for the company, the function for employees, and the function for the organizer of the retirement fund program. These functions will be described below.
  1. The function for the company is that later this savings can give an award to every employee for giving service to the company. In addition, this savings can also create a sense of security for employees to be able to reduce the rate of employees who stop working. Then it also improves the image of a company when running a business. And the latter can increase employee work motivation, so that the company's productivity also increases.
  2. The function for employees is that later in old age, it is generally difficult to continue working and earn income. With retirement savings, it can be replaced by old age savings that have been collected for a long time. A sense of security can be maintained and work motivation when young can be maintained. And if the recipient of this fund dies, the savings can be inherited to the surviving family. So, a sense of security is also obtained by the recipient's family.
  3. The function for program organizers will be that program organizers will have the opportunity to manage funds to generate profits, because old-age fund contributions can be classified as investments. Furthermore, this savings can also support government programs in the procurement of old-age funds. And finally, this fund can be considered as a social service activity to the participants of the fund's contributions.

Types of Pension Funds

There are types of pension funds that are generally divided into three types, namely employers, health insurance institutions, and financial institutions. For more details, you can understand it through the article below.

Employer Pension Fund (DPPK)

The first type is a fund created by an individual or an entity that employs employees. The individual or entity acts as the founder and organizes the old age savings program for all employees. This savings contribution is definite and providing the results of the collection to employees is an obligation for the employer. However, this type of DPPK has not been carried out by all companies and not all employees can directly participate as participants. Until now, only employees who work in SOE offices can get this DPPK such as Telkom, Astra, and Pertamina.

Financial Institution Pension Fund (DPLK)

The second type of pension fund is the Financial Institution Pension Fund or commonly abbreviated as DPLK. This DPLK has funds made by financial institutions such as banks. This institution or body will later manage individual pension funds for both employees and independent workers. Thus, the contribution is also definite and only charged to the employer, and the amount is based on the employer's profit. Anyone can become a participant in this DPLK for a predetermined period of time according to the amount of funds according to the agreement. For example, from this type of DPLK pension fund is a pension savings that can be found in several banks as the organizer or can also be in the form of old-age guaranteed life insurance.

Health Insurance Institution Pension Fund

The last type of pension fund is a fund organized by a life insurance company for individuals, both for office employees and independent workers, and separate from the employer's retirement fund.

How to Calculate Pension Fund

Retirement for some people is the most enjoyable thing. Because, this period will later be spent by enjoying life. Usually, they will spend this retirement by traveling, relaxing, or just gathering with their loved ones. Generally, retirement is also often enjoyed by doing all kinds of hobbies that have never been done before due to time constraints. For someone who wants to enjoy a relaxing and fun retirement, of course they must prepare everything regarding planning quite carefully. So, you can do good financial planning so that your retirement is also a pleasant one, of course. For this reason, doing the right retirement savings planning needs to be done by knowing and having the right way to calculate. For an example of the application of this pension fund calculation, you can apply it as follows: The needs and amount of pension funds for each person will certainly be very different, according to the needs and lifestyle of each individual. If you work as an entrepreneur, at least you have to set aside 5% to 20% of your total monthly income to prepare for this retirement savings. Then, for those of you who work as employees and have a fixed income, then you don't need to spend up to 20% of your total income, because you have been given the Old Age Insurance (JHT) program facilities that have been provided by the company. If you want to find out what is the minimum amount of pension funds that need to be prepared for old age, you can start by calculating your monthly income in a year divided by the deposit interest rate. For example, currently a 30-year-old person with an income of Rp 8 million per month and wants to enjoy old age by engaging in hobbies and traveling, then you must prepare a retirement fund carefully. If you want to save your retirement savings for 15 years assuming you don't have dependents and installments, then IDR 6 million is enough per month to meet your wants and needs. The calculation uses the formula of monthly needs multiplied by the retirement period (per month). You need to remember that the calculation of pension funds is not that simple because the current value of Rp 6 million will not be the same in the next 30 years. So, you have to think about the value of IDR 6 million in the next 30 years. If viewed from the past few years, the average annual increase in inflation is 4-5 percent. You can calculate your pension fund in the following way: Present Value (Co) = IDR 6,000,000 Rate per Period (r) = 0.416% Number of Periods (n) = 360 = IDR 26,742,473 This rate per period is an estimated increase in inflation, which is 5 percent divided by 12 months. While the number per period is the total number of years, namely (30 years x 12 months = 360. From this example, it can be concluded that the money needed each month was previously Rp 6 million, increasing to Rp 26.7 million per month. Therefore, if you want to prepare a retirement fund for 13 years (156 months), you need funds of around IDR 26.7 million x 156 months = IDR 4.1 billion.

Tips for Managing Pension Funds

There are things you must do to manage your finances so that retirement will be comfortable. You can apply the following pension fund management.

Force Yourself to Save and Invest

When receiving a salary at the beginning of the month, you must realize that the salary you receive must be set aside for living needs, whether it is routine such as paying installments, paying insurance, pension funds, or other living expenses that are included in your financial plan. Always force yourself to save. You can make saving a priority after meeting your main needs. In addition, when investing, you must know that there are risks in it. For this reason, always be careful in investing. Choose a safe investment according to your risk profile. Because, in investment, the higher the reciprocity, the greater the risk. You can use this investment as a preparation for your retirement fund in the future.

Create a Financial Plan

Basically, the financial plan is very easy and simple because it only contains income and expenses and also the projection of financial targets that want to be achieved in a certain period of time. You can make a short-term, medium-term, or long-term financial plan for more than 10 years such as old age savings. However, the first thing to do is to make a breakdown of the expense costs. You can always record expenses so that you can track expenses every month. Having a detailed expense record, allows you to see what things are draining your savings or salary. By knowing the leakage of expenses, you can be frugal in order to make your finances more stable.

Get Started Now

Getting started is a must to prepare this old age savings. You should not delay this habit of saving and saving immediately after making financial planning. If you have difficulties, you can ask for help from a financial planner who is experienced in managing finances to help make savings. In addition, a financial planner will also help in recommending the right financial products according to your financial goals and risk profile. Including directing investment as one of the preparations for your retirement fund. For long-term financial goals, usually this mutual fund investment can be your choice. There are several types of mutual funds according to the risk profile you need, ranging from stock mutual funds, mixed mutual funds, and fixed income.

Pay Off Debt and Prepare Emergency Fund

If you have a debt, then it's a good idea to pay off the debt immediately. The reason is, debt that has large interest will eat away at your income regularly without realizing it. So, the best solution for your finances to improve is to pay off debt if you have excess income. When your debt has been paid off, later you can allocate a budget to pay debt installments to investments and retirement funds. Although this debt transaction is not prohibited, it is as much as possible for you to avoid debt for consumptive needs. Even if there is an urgent need that requires debt, then you can take debt for a productive business that will generate income that exceeds the interest on the debt itself. What is no less important is that you must prepare an emergency fund, savings, insurance for personal protection, and a pension fund as explained above. For those who are single, they must at least have an emergency data deposit of 3 times their monthly salary. Meanwhile, for those who are already married, the nominal emergency fund can reach 6 times the monthly salary. The function of this emergency fund will be a savior when financial conditions are deteriorating. After learning about what a pension fund is, its benefits, types, how to calculate, and manage, make sure that you also continue to study this pension fund by finding out what investments are good and information about old age savings which is a program from the government. This the discussion from GICTrade regarding the explanation of "Pension Funds, How to Calculate and Manage Assets in Old Age". You can also find out other information about investment, savings, and other finances, such as "Small Capital Beginner Investments that You Must Try!" only in the GIC Journal. Also make sure you deepen your forex knowledge at GICTrade, via the scalping ebook, and also NFP live trading via the application on the Google Play Store and Apple App Store.