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Pension Funds

What is the Private Pension System?

Private Pension System is a savings and investment scheme that enables individuals to make regular savings and investments, so as to sustain the living standards they enjoy when they are employed, during their retirement; and that is supported by state contribution.

Who can benefit from the Private Pension System?

All individuals that are above the age of 18 and that have the capacity to act are qualified to benefit from the private pension system.

Given my eligibility for the pension system provided by the Social Security Institution, why should I also opt for a Private Pension System?

It may not be possible for you to maintain the living standards you enjoy at the time of your employment solely through the pension salary you will be receiving from the Social Security Institution during your retirement. As such, you should perceive the Private Pension System as a supplement to the social security system; intended to provide you with additional income and to enhance your welfare level during your retirement.

What is the state contribution?

In the Private Pension System, an amount corresponding to 25% of all contributions made to your private pension account excluding those undertaken by the employer, is deposited in your contribution account as state contribution.

The amount of state contribution a participant may receive is limited by 25% of the gross minimum wage pertaining to the year under concern. As for entitlement to state contribution and earnings: it is 15% for those participants that remain in the system for at least 3 years; 35% for at least 6 years; 60% for at least 10 years; and 100% for those that alongside having remained in the system for 10 years, also fulfil the 56 years of age condition.

Is the Private Pension System under state guarantee?

Private Pension System is not under state guarantee. However, it is supervised and controlled by a multitude of institutions including the Undersecretariat of the Treasury, Capital Markets Board, Pension Monitoring Centre, Istanbul Clearing, Settlement and Custody Bank Inc. (Takasbank), and independent audit companies. Participants’ savings are kept with Takasbank on a fund basis; and participants always reserve their right to withdraw and transfer their savings whenever they deem appropriate.

Under no circumstances may fund assets be sequestered, pledged, or offered as collateral.

What are your investment alternatives?

Your contributions are managed in pension funds established by pension companies. Through investing in a variety of money and capital market instruments such as local/foreign stocks, repo, treasury bills and government bonds, these funds serve to augment your savings.

You may access the pension funds under the management of our institution from the link below.

May participants opt for changes if not satisfied with the funds or the management company?

A Private Pension Insurance participant may change his/her pension plan 4 times within a year; and his/her allocations across funds 6 times in a given year. For a participant to transfer his/her savings to another pension company, at least 1 year needs to have elapsed as of the date of effect of the pension contract.

How does one become entitled to a pension?

Participants are entitled to a pension once they have paid contributions for 10 years and have completed 56 years of age. Once you have earned the right to a pension, you can receive the savings in your individual pension account partially, as a pension, or as a lump sum payment. Should you wish to take part of your savings, you may request payments from your individual pension account on a monthly, quarterly, semi-annual or annual basis on the basis of a schedule to be set up.

How is taxation administered?

While your savings are being managed, pension mutual fund returns are exempt from income tax. Should you opt to exit the system, as per the tax legislation, the applicable withholding tax rate would be 15% based on the total return on your pension account if you deposited contributions for less than 10 years; 10% if you deposited contributions for 10 years but are below the age of 56; and 5% if you fulfil both the 10-year contribution and 56 years of age criteria, and become eligible for retirement.

What is Automatic Enrolment in Private Pension and who is affected in what way?

Automatic Enrolment, developed to bolster the savings that employees will need during their retirement, has become effective as of January 1, 2017. With this application, a Private Pension Automatic Enrolment account has been opened for public/private sector employees registered with the Social Security Institution (SGK), working at a workplace, and below 45 years of age.

The amount of contribution determined by the Social Security Institution, corresponding to 3% of your taxable base for premiums, is transferred to your Private Pension System Automatic Enrolment Account until the end of the working day following the day on which your salary is deposited. On the other hand, the 25% state contribution applies to the Automatic Private Pension System as well. In a calendar year, State Support worth up to 25% of annual gross minimum wage is attainable. In Automatic Private Pension System, the amount of state support that an employee is eligible for is not affected in the event of an existing private pension contract. In this case, an employee receives separate state contributions from both the Automatic Private Pension System contract and the existing private pension contracts, thereby benefiting more from the system’s state contribution advantage.

What deductions are applicable?

What deductions are applicable?

Employees who remain within the Automatic Enrolment System for 10 years and fulfil the 56 years of age requirement for retirement are eligible for up to 5% additional state contribution, provided that they receive no lump sum payment; and buy an annuity insurance that would enable salary payments for at least 10 years.