The Role of Multipillar Scheme Reform on Pension Financial Deficit in Indonesia : Simulation Study of 2016-2045 Projection

Indonesia’s current pension scheme has been continuously generating rising financial deficit. By projecting forthcoming challenges, this research examines the role of parametrical and multipillar pension scheme reform in overcoming the future deficit. It is found that the former modification could reduce the shortage but not able to distort its upward trend. Meanwhile, the latter improvement could both lower the financial insufficiency and reverse its financial trend, depending on the investment performance. Compared to Chile’s pension reform in 1981, multipillar reform also has advantage in terms of the absence of transitional cost.