Two recent amendments have been made to the Turkish legislation on individual pension. The legislation amending the Regulation on the Actuarial Audit of Entities which Commit to Pension has been published in the Official Gazette dated 25 August 2016. Also, the law amending the Individual Pension Savings and Investment System Law no. 4632 has been approved by the Parliament and published in the Official Gazette dated 24 August 2016.
Amendments to the Regulation on the Actuarial Audit of Entities which Commit to Pension
In accordance with the recent amendments, entities which sponsor a pension plan for their members or employees (referred to as "service providers" in the legislation) are no longer required to inform the Undersecretariat of Treasury of changes made to the contact and management information, or to the pension commitments. Also, the frequency with which information must be supplied by the service providers has changed. The Treasury will now determine the submission periods for the information and actuarial reports based on the type of pension commitment, number of members in the pension scheme and size of the commitment. The service providers will send electronic data and financial statements to the Treasury through electronic means, while the actuarial reports will be sent to the Treasury by the actuary authorised by the service provider, with an electronic or mobile signature.
With regard to the actuarial report, the presumptions used by the actuary will now be based on actuary principles to be determined by the Treasury, in addition to the existing principles already listed in Annex 2 of the Regulation. We would expect the Treasury to announce these additional principles in the near future.
Although service providers are still required to notify the Treasury of their pension commitment and get registered on the service providers list kept by the Treasury, the three-month notification period has been abolished.
A new clause governs the termination of the pension scheme in further detail. In case of termination of the pension scheme, the assets in the scheme will be fairly distributed to the members in proportion to their vested rights and rights to be acquired, taking into account the internal rules of the pension plan. The period to notify the termination of the pension scheme to the Treasury has been increased from one to three months. The notification of the service provider to the Treasury must include a business plan for the termination addressing, among others, the intended termination period, the amount of payments to be made to the scheme members and the manner of payment. Unless the Treasury objects to the termination of the pension scheme within one month of the notification, the service provider can proceed with the termination process and again notify the Treasury once it is complete.
The amendments have entered into force on 25 August 2016.
Amendments to the Individual Pension Law
The new amendments have introduced a system of self-enrolment in the individual pension system to the benefit of employees. Employers are now required to enrol all their salaried employees who are Turkish citizens under the age of 45 into a pension scheme. The Council of Ministers, however, is authorised to determine the workplaces and type of employees which will be included into a pension scheme and the implementation principles.
Employers may only enrol their employees into a pension scheme issued by a pension company which is deemed appropriate by the Treasury. Although the employees will have an opt-out right within two months after being notified of their enrolment in the pension scheme, the recent amendments will likely increase the number of individual pension schemes in the market.
In case an employee uses the opt-out right, the contribution payments made from the employee's salary together with the investment incomes, if any, shall be returned to the employee within ten business days. The pension company is responsible for the fund management to secure the value of the contribution payments during the opt-out period. Furthermore, the pension companies will be responsible for the collection of the contribution payments, and no deductions can be made except for the fund management fee.
The amendments will enter into force on 1 January 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.