The Individual Pension System to be effective as from January 1st, 2017 requires the employers to provide individual pension plans for their employees pursuant to the Law related to the Amendments of the Law on Individual Pension Savings and Investment System ("Law").
- The EMPLOYEE, is defined under the
Law as an employee who;
- is a Turkish citizen or;
- is a citizen under the age of 45 and having a blue certificate pursuant to Article 28 of Turkish Citizenship Law numbered 5901; and
- is employed under an employment agreement pursuant to sub-paragraph (a) of first paragraph of Article 4 of Social Security and General Health Insurance Law numbered 5510; or
- works and will start to work for a remuneration in the public agencies pursuant to sub-paragraph (c) of the said article.
- Contribution Amount to be Paid to the Individual Pension System: The contribution amount to be paid to the Individual Pension System is 3% of the contribution amount of the employee subject to the premium; however, this rate is not fixed and the Council of Ministers is authorized to double the contribution amount, lower the rate to 1% or limit the contribution amount. Furthermore, if requested by the employee, the employer may deduct more than the amount set forth in the pension contract related to the automatic participation.
- State Contribution to the
Individual Pension System: As is known, pursuant to the
current system, a contribution amounting to 25% of the
employees' paid contribution is paid by the Government to the
voluntary participants of the Individual Pension System.
In addition to the said contribution, TRY 1.000,- of additional state contribution will be paid for a single time while participating into the system to the employees who employees do not exercise their exit rights from the compulsory individual pension system subject to the entitlement and payment conditions (i.e. staying at least 10 years in the system and paying the premiums owed.)
- Legal Nature of the Employee's Contribution: The contributions paid by the employee to the Individual Pension System will be deemed as privileged receivables in the nature of an employee receivable in terms of the collection via bankruptcy and sequestration under the Enforcement and Bankruptcy Law.
- Administrative Sanctions: The Ministry of Labor and Social Security will impose an administrative fine of TRY 100,- on the employers if the employers do not pay the contributions of their employees from their salaries or they do not perform their obligations under the said article.
TO SUM UP; it is expected that approximately thirteen million people under the age of 45 will participate into the compulsory individual pension system which will be effective as from January 1st, 2017. As the employers are responsible of the management of the funds related to the system and the payments of the contributions from the salaries of the employees, they should be attentive while implementing the procedure and rules to be effective with the law abovementioned. Otherwise, the employers will indemnify the employees for all their damages resulting from the failure of the employers to perform their obligations under the said law.
The Council of Ministers will determine which employers will be subject to this system and we will inform you accordingly.
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.