The Taspen Pension Fund Time Bomb
Monday, October 14, 2024
The KPK uncovered alleged embezzlement of the Taspen pension fund involving Sinarmas Sekuritas. The result of poor supervision by the OJK.
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WHEN it comes to anticipating corruption in state companies managing pension funds, the Financial Services Authority (OJK) seems always one step behind. As regulator and supervisor, the institution has failed to do its job, resulting in repeated instances of this crime.
The Corruption Eradication Commission (KPK) is investigating alleged corruption at Taspen in the management of Rp1 trillion of investments. There are indications that the losses to the state in this case involving the manager of civil servants' pension funds could amount to hundreds of millions of rupiah.
In March this year, the KPK detained Antonius Nicholas Stephanus Kosasih, who was the Taspen Financial Director from 2019 to 2020, and Ekiawan Heri Primaryanto, Chief Executive Officer of Insights Investment Management. A month later, they were named suspects. As well as these two, a number of senior Sinarmas Sekuritas staff, who were brokers in Taspen investment transactions, have been questioned.
The KPK began its investigation when it learned that the value of investments made by Taspen in mutual funds in May 2019 had plummeted by almost 30 percent, leaving only Rp703.74 at the end of December in the same year. The mutual fund, named Insight Tunas Bangsa Balanced Fund 2, or I-Next G 2, had been launched by Insights Investment Management at the end of October 2018.
In 2022, the Supreme Audit Agency (BPK) found that the management of the Taspen investment portfolio broke a number of rules. Among these was the placing of stock investments in share issuers with a market capitalization of less than Rp5 trillion, which resulted in potential losses of Rp762.82 billion, or minus 64.19 percent of the purchase price, as well as investing Rp100 billion in products with low BBB- credit ratings.
By buying stocks in share issuers with a market capitalization of less than Rp5 trillion, Taspen violated Finance Minister Regulations No. 51/2021 and 66/2021 on the management of accumulated pension contributions, retirement savings, workplace accident insurance and life insurance. The decision to invest in products with low credit ratings was a clear violation of the principle of caution, meaning it is fair to suspect there were illegal practices behind it.
The way the Taspen management was free to ‘play games with’ public funds is a direct result of the poor supervision by the OJK. This is despite the fact that OJK Regulation No. 27/2023 on the Management of Pension Fund Business clearly obliges the body to carry out direct or indirect inspections of a pension fund. If this obligation had been discharged properly, the irregularities at Taspen would not have happened.
The poor oversight of Taspen by the OJK has the potential to become a time bomb if we look again at the collapse of a number of insurance companies that ignored the principle of caution when making investments. It is not impossible that Taspen, which has investments of Rp394 trillion, will follow in the footsteps of Asuransi Jiwasraya and Asabri, two state-owned insurance companies that went bankrupt as a result of corruption.
The OJK should draw up and enforce strict regulations on the policing of investments in public funds by pension funds. One of these could ensure that these funds could only be placed in zero-risk instruments, such as government bonds. Without this, the OJK will always be one step behind.
