Law no 6740 on “Amending the Law on Individual Pension Saving and Investment System” entered into force on 01/01/2017. Law no 6470 added “additional article 2” to the existing Law no 4632 on the” Law on Individual Pension Savings and Investment System”, which introduced compulsory automatic enrollment of employees in a retirement scheme by employers. On 02.01.2017, based on above-mentioned additional article 2, “Regulation on the Procedures and Principles of Automatic Enrollment of Employees into a Retirement Scheme by Their Employers” is published in official gazette and entered into force.
Following points outlines cornerstones of new IPS.
In order to initiate auto enrollment, employers are obliged to enter into agreement with a pension provider company which is approved by Undersecretariat of Treasury. Pension funds, whether interest free or not, primarily will be decided by the employee. Calculation, deduction and transfer of employee’s contrıbution to the pension provider company is under the responsibility of Employer. Moreover employer is responsible of any loss arising from late or non-transfer of contributions.
Scope of Auto-Enrollment
Auto-Enrollment is applicable for every Turkish citizens (or those individuals within the scope of article 28 of Law no 5901 on Turkish Citizenship) who are under 45 years old and employed under the scope of articles 4 (a) and 4(c) of Law no 5510 on Social Security and General Health Insurance and their employers.
Incorporation of Public Sector Employees
In accordance with article 5 of the regulation, mandatory participation in the Individual Pension System for those public sector employees within the scope of articles 4 (a) and 4(c) of Law no 5510 on Social Security and General Health Insurance, who are employed in public agencies listed under the schedules (I), (II), (III) and (IV) of Law no 5018 on Public Finance Management and Control, will be effective on 01.04.2017. For those public sector employees employed other than above listed agencies, regulation will be effective on 01.01.2018.
Incorporation of Private Sector Employees
Article 6 of regulation requires gradual implementation of mandatory participation in Individual Pension System among the private sector employees. Those employees within the scope of regulation, will be gradually enrolled in a pension scheme by their employers in accordance with the number of staff in their workplaces.
- Auto-enrollment will be mandatory for those companies with 1000 and more staff on 1st January 2017.
- Auto-enrollment will be mandatory for those companies with 250 – 999 staff on 1st April 2017.
- Auto-enrollment will be mandatory for those companies with 100-249 staff on 1st July 2017.
- Auto-enrollment will be mandatory for those companies with 50-99 staff on 1st January 2018.
- Auto-enrollment will be mandatory for those companies with 10-49 staff on 1st July 2018.
- Auto-enrollment will be mandatory for those companies with 5-9 staff on 1st January 2019.
The number of employees shall be determined on the basis of the total number of employees in one or more establishments of employer. Moreover once the employer is covered, reduction in the number of employees after the date of coverage will not be considered.
Calculation of Contribution
As per article 7 of regulation, amount of contribution shall be calculated as 3 % of Social Security Base or Pension Deduction of employee. In the calculation, decimals will not be considered. Contribution amount will be transferred to the pension provider company on behalf of employee on the first working day of following payment of employee’s salary.
For instance social security base of minimum wage is 1777.50. Contribution amount of employee working with minimum wage will be,
1777.50 * 3% = 53, 32.
Contribution amount will be rounded by employee to 53 TRY and this amount will be deducted from net salary of employee.
Right of Withdrawal
Pursuant to additional article 2 of Law no 4632, employees may leave the system within two months of joining. In the case of leaving pension scheme, employees may take a refund of their contributions within 10 working days. When employees change their jobs, their accumulated savings will be transferred to their new workplaces as well. However if new employer has no pension plan, employees, upon their requests, may continue to pay contributions based on their previous arrangements or may request termination of their pension plans until the end of next month of their job change.
The same as existing Individual Pension System, 25% of state contribution will be made to the savings of employees. If employees stays in the system, another state subsidy of 1.000,00 TRY will be granted. In the case of retirement, as an additional 5% state subsidy will be provided, if employees prefers to withdraw their savings within the scope of minimum ten years annual income insurance contract.
 Law no 6740 Date of Enactment: 10.08.2016 Published in the Official Gazette on 25 August 2016, No. 29812
 Law no 4632 Date of Enactment: 28.03.2001 Published in the Official Gazette on 07 April 2001, No. 24266
 Regulation on the Procedures and Principles of Automatic Enrollment of Employees into a Retirement Scheme by Their Employers, Published in the Official Gazette on 02.01.2017, No. 29936