New Individual Private Pension Savings and Investment System Law

Turkish authorities have introduced the Private Pension Law No: 6740 which oblige the Auto Enrollment of Employees to Private Pension System. The Law  is published in the Official Gazette dated 25.08.2016 and it shall enter into force on the effective date which is 01.01.2017.

Please refer below for the brief details of the Law;

A. Employees Who Are Obligated to Participate in the Individual Pension System;

Employer is obliged to provide a pension plan with a pension agreement in accordance with the Individual Pension Savings and Investment System Law for its employees who;

• are Turkish citizen and are below 45 years of age;
• are working according to Article 4/1 (a) – working for one or more than one employers with a specific labor contract
• are working according to Article 4/1 (c) – working in the public administrations

Limits and the commencement dates are determined by the law regarding to the auto enrollment for Private Pension Plan are shown on the table below;

B. Calculation of Contribution in the Individual Pension System;

• The contribution of employees is equal to 3% the earnings taken as basic to premimum according to Law No: 5510 Article 80. (Council of Ministers is entitled to increase the rate up to 6% and to decrease down to 1% as well as to set a limit for pension contributions)
• Employee can request to increase the percentage of contribution (3%) from the employer. In this case the employer is obliged to do so.
• 25 % additional goverment contribution will be provided on behalf of employee over the payments made to individual pension account.
• In case employees are not use right of withdrawal, one-off goverment contribution amounting to 1.000 TL will be provided to the employee.
• Additional state subsidy equaled to 5% of the savings shall be paid to the employee, if the employee, who prefers to receive the savings in his account within the scope of annuity agreement with a period of 10 years at least, uses his right of pension.

C. Rights of an Employee

• Employee can withdraw the pension agreement in 2 months following the date on which the employee is informed that he is included in the pension plan. In that case, the paid amount of contribution shall be paid back together with the investment income to employee in 10 days.
• Employee who does not use right of withdrawal may request a break for the contribution payments for certain time in specific cases.
• In case the employee changes his work place, savings and pension period shall be transferred to his pension agreement in the new work place on condition that there is a pension plan according to current Individual Pension Savings and Investment System Law.

D. Responsibilities of Employer

• Employers are responsible from choosing the one of the Private Pension Company and responsible from enter into angreement with them.
• Employee contributions are transferred to Individual Pension Company by employers at the latest following day employee’s salary payment. Employers are audited within obligation of this Article by Ministry of Labor and Social Security.
• In case the employer fails to fulfill his obligations regarding the Law and fails to comply with the regulations on the force, administrative fine equaled to 100 TRY (for 2017) shall be applied to employer for each breach.