The new mandatory individual pension system which is regulated in the Individual Pension Savings and Investment System Law numbered 4632 dated August 25, 2016 requires all employees under the age of 45 to enroll in an employer-provided defined contribution pension plan as of January 1, 2017. According to this new plan, Turkish employees, working at private and public sector, through a labor contract will be included in the scope of mandatory individual pension system through the agreement executed with the employers.
This enrollment will be automatically participated for all employees under age 45 as of January 1, 2017, but the employees will have the right to opt out within the first two months of enrollment. Foreign workers are excluded from the mandate. The pension company that the employer may choose must be amongst the one approved by the Undersecretariat of Treasury. The employees may not individually enroll to this system.
Participants’ contribution amount will be 3% of their earning subject to premium which is determined as per the article 80 of the Law numbered 5510. This amount will be transferred to the pension company on the wage pay day. The Council of Ministers is authorized to double the contribution rate or lower to 1%, or determine it to a fixed amount.
The employee may ask from the employer to deduct more than the amount determined in pension contract. If the employer does not duly transfer the relevant amount to the pension company, the employer will be responsible of any loss on employee’s saving. The employee may demand from the employer to increase the amount to be paid to the pension company.
As the name of the system is “mandatory”, the employees may get out of the system within 2 months as of the date they informed about being included in pension plan. In this case the accumulated amount of contributions and investment income, if any, will be refunded within 10 days. If the employee doesn’t use his/her right of withdrawal, the Government will provide state subsidy for employees, amounting to 1.000.-TL. The Council of Ministers is authorized to increase or decrease that amount.