Turkey: Compulsory Individual Pension System

An individual pension system was introduced in Turkey in 2001 with the Law on Individual Pension Savings and Investment System ("Law") No. 4632. Since that time, the Law has been amended several times. The most recent amendment was made with the Law on Amendment of the Law on Individual Pension Savings and Investment System ("Amendment Law") which was published in the Official Gazette on August 25, 2016.

The Amendment Law made the individual pension system compulsory for many Turkish employees, with the stated goal of improving the welfare of employees. The compulsory individual pension system ("CIPS") came into force on January 1, 2017, as per the Amendment Law.

1. Employees Covered by the CIPS

All Turkish citizens who are under the age of 45 and are currently working (or will start working) under an employment agreement are within the scope of the CIPS. Furthermore, public sector employees subject to Article 4(c) of the Law on Social Insurance and General Health Insurance No. 5510 are also within the scope of the CIPS, if they are 45 or younger.

Employees will participate in the individual pension system with a pension agreement prepared by their employers in accordance with the Law. Employers should work in cooperation with a pension company that is approved by the Undersecretariat of Treasury to offer compulsory individual pension schemes.

The CIPS does not cover all employees at the moment; however, its scope will be gradually expanding. The system will be in effect for employees who work at workplaces with (i) 1000 or more employees as of 01.01.2017, (ii) 250 to 999 employees as of 01.04.2017, (iii) 100 to 249 employees as of 01.07.2017, (iv) 50 to 99 employees as of 01.01.2018, (v) 10 to 49 employees as of 01.07.2018, (vi) 5 to 9 employees as of 01.01.2019.

If an employer has more than one workplace, the number of employees will be determined for the purposes of this law as the total sum of the number of employees working at all of the employer's workplaces.

2. Employee Contributions to the System

Employee contributions to the CIPS will be 3% of the employee's basis earnings subject to the employee's premium. It should be emphasized that it is not the net earnings that will be taken into account while calculating the employee's contribution; premium, bonus, and some other payments are also considered. The Council of Ministers is authorized to increase the employee's contribution rate up to 6% or decrease it down to 1% or set it at a fixed amount of money. Employees are entitled to request that their employers make a higher deduction from their earnings than the amount agreed upon in the pension agreement. Therefore, an employee's contribution rate, as determined by the Law or the Council of Ministers, provides only the minimum rate, which may be increased if an employee wishes to do so.

An employee's contribution will not be paid to the pension company directly by the employee. Instead, the employer is obligated to deduct the employee's contribution from the employee's earnings and pay it to the pension company on behalf of the employee. These payments must be made by the first business day following the employee's salary pay date at the latest. If the employer does not pay the employee's contribution at all or pays it late, the employer will be liable for the employee's monetary loss, if any.

3. Employees' Right to Withdraw from the Pension Agreement

Employees are entitled to withdraw from the pension agreement within two months after employers notify them of their participation in the compulsory individual retirement system as mandated by the Law. If an employee withdraws from the pension agreement, the employee's contributions and investment incomes, if any, must be paid to the employee within ten business days after the withdrawal date. Pension companies are responsible for managing their funds in a way that protects the value of the employees' contributions during the withdrawal period of two months.

Employees who do not exercise their right to withdraw from the pension agreement are nevertheless entitled to request the suspension of payment of employees' contribution in certain circumstances, as determined by the Undersecretariat of Treasury.

4. Change of Workplace

If an employee's workplace changes and there is a pension scheme within the scope of the CIPS in use at the new workplace, the employee is entitled to transfer his/her accumulated savings and retirement time basis gained (as calculated according to the expired pension agreement) to the new pension agreement offered by the new employer.

If there is no pension scheme within the scope of the CIPS in use at the new workplace, the employee may either continue to pay the employee's contribution within the scope of the pension agreement in effect at the previous workplace, or terminate that pension agreement. The employee must notify the pension company of his/her decision by the end of the month following the change of workplace at the latest.

5. State Contributions and Retirement

Employees will receive a state contribution to be added to their savings, in the amount of 25% of their paid contributions.

However, in order to receive the full amount of this state contribution, employees must receive their retirement benefits from the CIPS; otherwise, the state contribution will be partially or fully withheld from the employees, depending on the number of years that they have paid into the compulsory pension system. In addition to the 25% state contribution to employee contributions, the government will also provide a TL 1,000 bonus to the employees' pension schemes if the employees do not withdraw from the pension agreement within the two-month withdrawal period.

If the employee retires and chooses to receive his/her retirement benefits through an annuity contract, the employee will then receive an additional state contribution amounting to 5% of his/her accumulated savings.

Employees will be entitled to retire at the age of 65, if they have been involved in the compulsory individual retirement system for at least 10 years.

6. Sanctions against Employers

The obligations of employers within the framework of the CIPS will be subject to the supervision of the Ministry of Labor and Social Security. An administrative fine of TL 100 (for 2017) may be imposed for each violation, if employers do not comply with the duties and obligations provided by the CIPS.

This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in March 2017. A link to the full Legal Insight Quarterly may be found here


This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in March 2017. A link to the full Legal Insight Quarterly may be found here.


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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Herguner Bilgen Ozeke Attorney Partnership
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Herguner Bilgen Ozeke Attorney Partnership
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions