Turkey: Govt plans to introduce complementary pension scheme
Source: Middle East Insurance Review | Dec 2019
The Turkish government plans to launch the Complementary Pension System (TES) next year, announced as part of the 2020-2022 national economic programme. The goal is to plug a gap in the country’s pension system.
Currently, the pension system in Turkey comprises the state pension system which is administered by the Sosyal Güvenlik Kurumu (Social Security Institution, SGK) and formed in 2006; and the voluntary individual private pension system (PPS) which was established in 2003. The number of participants in the voluntary PPS when it started was 6.8m; however, this fell to 5.3m in 2017.
In 2017, the automatic enrolment pension scheme (called OKS) was introduced as part of the private pension system.
Under the OKS, aimed at encouraging retirement savings, the Turkish government contributes up to 25% of the amount paid by the employee, and directs automatic enrolment to the scheme for those aged 18-45. However, the OKS gives employees the right to withdraw from it within two months of enrolment. The opt-out rate from the system is around 60%, affecting the operations of pension companies and prompting the government to propose the TES, under which it would not be as easy for employees to exit the scheme.
Anyone who is between 18-45 years of age and actively working will have to participate in TES, which will actually function as a compulsory savings fund. The subscription sum will vary with the employee’s pay level. M