As part of compensation and benefit, many companies provide DPLK for their employee. DPLK stands for Dana Pensiun Lembaga Keuangan. The purpose of providing DPLK is to make sure that employees will have pension fund after they finish working in the companies
In financial planning, there are two types of pension program. Defined Benefit Pension Program and Defined Contribution Pension Program. DPLK falls into Defined Contribution Pension Program. Usually the certain percentage of employee income plus certain percentage from company will be deducted, and put into DPLK account for them to manage.
Now, you may think that your pension fund is secured. You have something to hold on to once you reach the pension age. They will manage it well, the money will grow. So you can sit back and relax and when the time comes, you can just pick the fruit of your investment.
Well, think again
Financial Planning always start with financial goals. May this be emergency fund, new home, education fund, even free yourself from credit card debt, the goals should come first.
Let me remind you that DPLK is Defined Contribution Pension Program.. It’s the contribution that fix. You will keep investing the same % of your income for a certain time. And after quite sometime (your pension age, in this case) you get the final report on how much money you have for yourself.
Let’s do this right.
How many of you know how much you need for your pension fund?
If you are 30 years old with monthly expense of IDR 5 mio, and expect to keep your lifestyle at this level, you will need pension fund of IDR 8.4 billion (Let me spell this for you the exact amount: IDR 8,418,461,113.27). Ok, you may need something to hold on to now ^_^
Now, let’s take a look at your DPLK. Assuming you will work for the same company until you reach pension age. If your current salary is IDR 7mio, and your salary adjustment are 5% per year, your money will be IDR 1.3 billion by the time you are 55.
Wait the minute. Something is wrong here. Why only 1.3? You need 8.4. What about the difference? How can you get the short of your pension fund? How this can happen?
Let me tell you why.
First, it does not start with the goal. It’s a given program.
Second, it’s Defined Contribution Pension Program, not Defined Benefit Pension Program. If it is Defined Benefit Pension Program, you will come up with 8.4 first and start from there.
Third, since most of the companies are usually very conservative, the choice of investment at DPLK is usually the most conservative one (usually the return is 10%-12%). Remember the rule of thumb of investing? High risk high return, or in this case low risk low return. If the choice is to invest in a low return instrument, the consequence is you need to invest more.
Now, how to close the gap?
We can close the gap by adding your pension fund by ourselves. It’s our lives, it’s our pension funds, so it makes sense if we take the responsibilities.
To close the gap of 7.1, we need to invest. In this case, you will only need to invest IDR 300,000 per month to the right instrument - in this case stock mutual fund. This regular investment until you reach 55, can close the gap.
How can it be?
This type of mutual fund have target return of 25%, so we can use it to fight the inflation and grow your money.
Is it save?
Save is over rated. Even putting your money in saving account is not save. Why? Because it will surrender to the inflation. Surely stock market is fluctuating, but the over all trend line is positive. Time horizon of 25 year before pension time will smooth the risk. And if you invest monthly, you will buy on the average price
But I am not comfortable with investing in stock market. I am not a risk taker
It means you will have to invest more in the instrument with lower risk, with lower return
So, ready to close the gap?
Let’s go!
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