Private pension system in Turkey
Today, I will dwell upon the Turkish Private Pension System, or PPS, and what it has to offer foreigners.
I mentioned the public social security system in Turkey in my previous article and evaluated it especially in terms of foreigners. Today, I will dwell upon Turkish Private Pension System, or PPS. In this context I would like to touch on the following topics;
· PPS arrangements in Turkey
· Foreigner’s joining the PPS
· Rights and obligations of the participants
· Fees and charges
· Comparison of the public and private pension systems for foreigners
[HH] Short history of PPS in Turkey
In Turkey, the legal and institutional framework of the Turkish PPS was completed in 2002. Therefore, PPS is considered to be relatively new for Turkey. However, PPS has showed a significant improvement in this short period.
[HH] Participation of foreigners
All real persons (include foreigners) who possess the capacity to exercise civil rights according to Turkish Civil Law are eligible to participate in the individual pension system. In other words, PPS does not have limitation or prohibition for foreigners.
Firstly, a private pension contract must be signed between the individuals and the pension company to enter the system. Under the Regulation on Private Pension System, those who pay pension contributions in part or in full together with the main participant are also regarded party to the pension contract jointly with the main participant.
The pension contract serves as the main guide governing the issues between those who are concerned with the pension scheme and covers the retirement plan, the rights and obligations of the participant (together with the joint participant, if any), terms of contributions and retirement, fees and related calculations.
[HH] Interruption of contributions or retirement
The participant may stop contributing to the system at any time before retirement. Provided that the reason for interruption is compliant with the terms of the pension contract, the interruption would not cause the participant to lose his/her retirement rights arising from the initial participation in the system.
The participants are entitled to retirement if the following two conditions are satisfied:
· Reaching the age of 56
· Having been in the pension system for at least 10 years starting from the entrance date to the system.
It is essential that the participant has stayed in the system for 10 years in order to be eligible for retirement.
The participant may leave the system before becoming eligible for retirement either for mandatory reasons (i.e. due to death or permanent disability) or voluntarily. In cases where the participant dies within the contract period, his/her beneficiaries have the right to demand the payment of the accumulated savings in the individual pension account.
Also, in the event of permanent disability within the period of the contract, the participant, may request to withdraw the savings from his/her individual pension account. The participant may also exit from the system voluntarily before obtaining the right to retire.
In such a case the accumulated saving of the participant is paid in accordance with the provisions of the pension contract.
[HH] Comparing public, private systems
Compared with the public pension system, PPS has some advantages for foreigners.
· While there are required conditions for participation in the public pension system, there is no prerequisite to enter the PPS.
· Personal conditions are not taken into consideration in the public pension system, but PPS can be adapted according to personal circumstances.
· If you exit the public pension system, refunds for contributions are almost impossible. However, in PPS, refunds are easier.
Under these conditions, PPS seems more flexible and useful than the public pension system for foreigners.
Hurriyet Daily News/19.03.2010
I mentioned the public social security system in Turkey in my previous article and evaluated it especially in terms of foreigners. Today, I will dwell upon Turkish Private Pension System, or PPS. In this context I would like to touch on the following topics;
· PPS arrangements in Turkey
· Foreigner’s joining the PPS
· Rights and obligations of the participants
· Fees and charges
· Comparison of the public and private pension systems for foreigners
[HH] Short history of PPS in Turkey
In Turkey, the legal and institutional framework of the Turkish PPS was completed in 2002. Therefore, PPS is considered to be relatively new for Turkey. However, PPS has showed a significant improvement in this short period.
[HH] Participation of foreigners
All real persons (include foreigners) who possess the capacity to exercise civil rights according to Turkish Civil Law are eligible to participate in the individual pension system. In other words, PPS does not have limitation or prohibition for foreigners.
Firstly, a private pension contract must be signed between the individuals and the pension company to enter the system. Under the Regulation on Private Pension System, those who pay pension contributions in part or in full together with the main participant are also regarded party to the pension contract jointly with the main participant.
The pension contract serves as the main guide governing the issues between those who are concerned with the pension scheme and covers the retirement plan, the rights and obligations of the participant (together with the joint participant, if any), terms of contributions and retirement, fees and related calculations.
[HH] Interruption of contributions or retirement
The participant may stop contributing to the system at any time before retirement. Provided that the reason for interruption is compliant with the terms of the pension contract, the interruption would not cause the participant to lose his/her retirement rights arising from the initial participation in the system.
The participants are entitled to retirement if the following two conditions are satisfied:
· Reaching the age of 56
· Having been in the pension system for at least 10 years starting from the entrance date to the system.
It is essential that the participant has stayed in the system for 10 years in order to be eligible for retirement.
The participant may leave the system before becoming eligible for retirement either for mandatory reasons (i.e. due to death or permanent disability) or voluntarily. In cases where the participant dies within the contract period, his/her beneficiaries have the right to demand the payment of the accumulated savings in the individual pension account.
Also, in the event of permanent disability within the period of the contract, the participant, may request to withdraw the savings from his/her individual pension account. The participant may also exit from the system voluntarily before obtaining the right to retire.
In such a case the accumulated saving of the participant is paid in accordance with the provisions of the pension contract.
[HH] Comparing public, private systems
Compared with the public pension system, PPS has some advantages for foreigners.
· While there are required conditions for participation in the public pension system, there is no prerequisite to enter the PPS.
· Personal conditions are not taken into consideration in the public pension system, but PPS can be adapted according to personal circumstances.
· If you exit the public pension system, refunds for contributions are almost impossible. However, in PPS, refunds are easier.
Under these conditions, PPS seems more flexible and useful than the public pension system for foreigners.
Hurriyet Daily News/19.03.2010
