Gradual Implementation in Turkish Private Pension

private pensionAutomatic enrolment in private pension system will put into action gradually, starting with workplaces employing 1000 and more personnel at the beginning of 2017, Deputy Prime Minister announced at a press conference. He also added that the cabinet decree containing the arrangement has been opened for signature.

Auto-enrolment, in other words mandatory participating in private pension scheme has long being occupying the agenda of Turkey’s business community. Private Pension System, which is complementary to the mandatory state social security scheme and indented to improve the welfare level of employees by providing a supplementary income during retirement and also to increase the domestic savings, has been introduced by Law No. 6740 and will enter into force on 1st January 2017.

Turkish citizen employees under the 45 years of age who are working against wage under a service contract (in the scope of Law No. 5510, articles 4/a, and 4/c) will be automatically enrolled in a pension plan arranged by employers. Participant employees may have the right of withdrawal from the system.

The most concerned point about the implementation of the Law was whether all employers will be in the scope of law at the same time as of 1st Jan 2017, or there will be a transition period for comparatively small businesses.

According to Deputy PM Mehmet Şimsek, workplaces will start to enter into contracts with pension companies and offer pension plans to the employees in the scope of Law on different dates, depended on their number of employees.

Workplace Number of Staff                            Private Pension Start Date

      1000 and over                                                  1st January 2017
   250 (Inc.) to 1000                                                   1st April 2017
        100 to 249                                                         1st July 2017
          10 to 49                                                           1st July 2018
            5 to 9                                                          1st January 2019

Outlines of Private Pension System

Base legislation

Law No. 6740, “Amending the Law on Individual Pension Savings and Investment System,” which has been issued in Official Gazette numbered 29812, dated 25 August 2016, and will enter into force on 1 January 2017.

Implementation regulation is expected to be issued before end of the year.

Scope of the Law

Employees who will be automatically enrolled in a pension plan through a pension contract arranged by employer shall be;

  • Turkish citizens or the persons who had been Turkish citizens by birth but lost it by obtaining a renunciation permit in line with Law No. 5901.
  • Working against wage under a service contract (in the scope of Law No. 5510, articles 4/a, and 4/c)
  • Under the age of 45 years.

Date of entering into plan depends on the number of personnel of workplace employees are working in.

Amount of contribution

Participants' minimum contribution amount will be 3% of their earning subject to premium. It will be possible to contribute more than this amount.

Withdrawal from the Private Pension Plan

  • Participant employees may get out of the system within 2 months as of the date they informed about being included in pension plan.
  • In case of withdrawal, the accumulated amount of contributions and investment income, if any, will be refunded within 10 days.

Workplace change

In the event of workplace change, employee's accumulated savings and retirement time base gained in the system will be transferred to pension contract of the new workplace, if the new workplace has a pension plan. Otherwise employee, if he/she requests, may continue to pay contribution to the contract arranged in previous workplace; if he/she doesn't wishes to continue, the pension contract will be terminated.

Responsibilities and Obligations of Employer

  • All companies (real and legal persons, or institutions and organizations not having a legal personality), which employ individuals deemed to be insurance holders, are under the obligation of entering into an agreement with a pension company. This obligation will start on different dates depending on the number of personnel they employ, as it is seen above.
  • Employer shall offer pension plans to the employees in the scope of related Law
  • The pension company that the employer may choose must be amongst the one approved by the Undersecretariat of Treasury.
  • Employer shall determine the managers who are authorized to sign the pension contracts on behalf of central and provincial units of the company,
  • In the concluding of an agreement with pension companies, employer should observe the employee' benefits as regard to service quality and other factors they provide.
  • Employer must calculate and deduct the participant's contribution and transfer them to Pension Company at the day following the wage payment day of employee at the latest. Employee will be responsible of any loss on employee's saving, arising from late or missed transfer of contributions
  • Participants' choice for pension fund should be taken into consideration.

State Subsidy/Incentives

  • Government will provide state subsidy for employees, amounting to 25% of employees' paid contributions to private pension account.
  • In case the employee stays in the plan, another state subsidy of 1.000,00 TRY will be provided for once only.
  • In the event of retirement, if the participant prefers to be paid in the scope of an annuity contract (at least ten years), government will provide up to 5% of his accumulated savings into private pension accounts as state subsidy.

Entitlement to Retirement

  • Participants who are stayed in the system at least ten years will be entitled to retirement at the age of 56.
  • Retired participant may choose to receive
  1. a lump-sum payment,
  2. a fixed annuity
  3. a life annuity.

Current Private Pension Savings

  • The savings in the current voluntary private pension cannot be transferred to mandatory pension plans.
  • All employees under 45 years of age will be automatically enrolled in new arranged pension plan as of 1 January 2017, whether they are participated in current system or not.
  • Employees enrolled in the current system may either chose to continue to participate in both system or may withdraw their savings from the current one.


As we stated at the beginning of the article, the cabinet decree containing the arrangement has been opened for signature, and some details are not clear for the time being. When the Decree is issued in the Official Gazette, we will inform you immediately."

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