The act amending Turkey’s pension system came into effect as of January 1st, 2017. This act regulated the enrolment of all employees under the age of 45 in private pension plans set up between the employers and pension companies.
Though the act was effective as of January 1st, 2017, it is being applied gradually depending on the number of employees in the company. To date, employees of companies with at least 50 employees have been automatically enrolled in the system. As of July 1st, 2018, employees of companies that have between 10 and 49 employees will be automatically enrolled in the system and, as of January 1st, 2019, employees of companies that have between five and nine employees will be automatically enrolled.
An employee who has been automatically enrolled in a private pension plan is entitled to withdraw from the system within two months of the enrolment date. According to recent surveys, some 9.6 million employees had been enrolled in the system and 6.1 million employees had withdrawn as of February 27th, 2018. That is, almost 61% of employees had exercised their right to withdraw from the system within two months.
As the majority of employees have withdrawn from the system, the legislative authorities are trying to improve it. In this regard, the Ministry of Finance recently prepared a draft omnibus law, which introduced new provisions regarding the automatic enrolment of employees in the private pension plan system. As per the draft omnibus law, the following changes will be made:
The Council of Ministers will be entitled to increase the withdrawal period to six months. The minister will be entitled to appreciate the value of the additional TL 1,000 one-off state contribution. The minister will be entitled to invest the additional TL 1,000 one-off state contribution in related funds
The proposed amendments may slightly improve the popularity of the automatic enrolment system. However, the negative trend in uptake is believed to derive from the fact that no employer contribution has been outlined and there is no provision in the proposed legislation in this regard.