With an effort to improve the welfare of the employees in
Turkey, the Turkish Parliament approved the Law amending the Law on
Individual Pension Savings and Investment System on August 10, 2016
and it is published on the Official Gazette on August 25, 2016.
Accordingly, all Turkish employees working under wage and whose age
are under forty five will automatically be included in a private
pension plan by their employer as from January 1, 2017.
According to the new pension system, the employer must prepare a
pension contract and choose a pension company that is approved by
the Undersecretariat of Treasury. Participant employees'
contribution to the pension plan will be 3% of his earnings subject
to premium. The contribution will be deducted from the
employee's salary and paid by the employer on behalf of the
employee. This contribution can be doubled, decreased to 1% or
determined as a fixed amount with the decision of Council of
Ministers. Employee, may also, request from the employer to deduct
a higher amount from his earnings than it is determined under the
Employer must transfer the deducted amount to the pension
company on the first business day following the employee's
salary pay date. If the employer does not transfer the necessary
amount on the due date, it will be liable for the losses of the
Participant employee has the right to withdraw from the pension
plan within 2 months as from the date when the employer notifies
the employee of its involvement in the pension plan. If the
employee withdraws from the pension plan, the contributions will be
returned to the employee within 10 days together with investment
income, if any.
Employees will receive a state subsidy to their pension accounts
at the rate of 25% of their paid contributions. Additionally, if
the employee does not withdraw from the pension plan within the
first 2 months, it will receive TRY 1,000 to the pension account as
another state subsidy for a single time. If the employee retires
with at least 10 years of savings in the pension account and
prefers to be paid within the scope of an annuity contract, the
employee will then receive 5% of his accumulated savings as state
subsidy. Participant employee will gain the right to retire at the
age of fifty six if the employee has been involved in the pension
for at least 10 years. If the participant employee leaves the
pension plan before the retirement, the employer will receive only
a portion of the state subsidies in its pension account.
Accordingly, if the employer leaves the pension plan before 3
years, it will not receive any state subsidy.
If the work place of the employee changes, the employee may
transfer the existing pension contract to the new work place with
its accumulated savings and gained retirement time basis provided
that the new work place has a pension plan. However, if the new
work place does not have pension plan, upon the request of the
employee, it may continue to pay contribution within the scope of
the pension contract of the previous work place.
The companies that will be subject to the new private pension
system are not determined yet and it will be determined by the
Council of Ministers. It is expected that only the companies
employing more than a certain number of employees will be subject
to the new pension system.
Pension companies will be responsible for the collection of
employee's contribution. If the employer breaches any of its
obligations under this new system, it will be subject to a fine of
TRY 100 for every breach.
It is undoubtful that the new private pension system will serve
to the benefit of the employees. However, it may still be subject
to criticism and subsequently further amendments after its entry
into force on January 1, 2017.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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