AMENDMENTS ON PRIVATE PENSION SYSTEM AND GRADUAL TRANSITION SYSTEM
Regulation on the Amendment of the Regulation on the Individual Pension System (the “Regulation”) is published in the Official Gazette on the 17th December 2017.
The Regulation is prepared basing upon the Individual Pension Savings and Investment System Law Nr: 4632 (the “Law”).
The Purpose and Scope of the Regulation
The purpose of this regulation is to regulate the principles and procedures regarding the entry to the private pension system, the rights and obligations of the parties under the pension contract and the functioning of the individual pension system, from the signing of the pension contract until its termination.
Regulations on the gradual transition system
Local administrative bodies and private sector companies with 50-100 employees in Turkey will automatically join the private pension system starting from 1 January.
The gradual participation of the employees under the age of 45 to the automatic private pension system, which has been implemented since the beginning of this year, will also continue in the new year in order to increase savings across the country.
The private sector companies, with 10 to 50 employees will participate to the system on July 1, 2018 and the private sector companies with 5 to 10 employees will participate on January 1, 2019.
Employees who are new to the system shall also subject to a private pension system cut in the same period, corresponding to 3 percent of their base earnings.
Participation fees paid by employees will be given a 25 percent incentive under the same conditions as Private Pension System. The employees who continue their participation after the 2 month period for rescission, a contribution of a thousand Turkish liras will be granted by the state. Additionally, in the case of retirement, the employees who prefer to take his/her accumulated funds in the form of annual income insurance shall be granted an additional contribution of up to 5% of his or her savings, by the state.
As of December 8, there are 3 million 425 thousand 335 employees within the Automatic Private Pension System. The total amount of funds of the employees in the system is 1 billion 670 million 644 thousand 116 Turkish Liras. The total number of employees in Private Pension System is 6 million 902 thousand 24 and the amount of funds is calculated as 66 billion 149 million 364 thousand 553 Turkish Liras.