Private Pension System

PRODUCT DEVELOPMENT 31.05.2022, 13:55
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Private Pension System

This article aims on briefing about the Private Pension System (PPS) within the framework of experience in Türkiye.

PPS is a private pension application with a nature that complements the mandatory social security system.

Being a private pension model with a nature that complements the mandatory social security system, the Private Pension System (PPS) is an application, based on voluntary participation and defined contribution, that aims on contributing to the welfare levels/living standards people have in their period of retirement by channeling savings of individuals for retirement into long-term investments. PPS was put into service in October 2003.

It is observed that PPS customers are offered significant incentives by the state.

The amount corresponding to 30% of the contribution shares paid/deposited into the PPS account by the participants are transferred to the accounts of these individuals by the state in cash as state aid. A participant may benefit from state contribution for the contribution share payments s/he has made in a calendar year up to the total of the gross minimum wage determined for the relevant year. For example, the amount of contribution share that must be paid to benefit from the upper limit of the state contribution for 2022 is TRY 60,048. As a result of the regulation made in January 2022, the advantage of granting state contributions to the participants in case of a lump sum deposit into the system was implemented as an encouraging factor.
In the event that the participants get in need of cash in critical stages of life such as education, marriage, and housing purchase, they have the right to withdraw the complete amount from the system and also to withdraw a certain part of their savings without depriving themselves of the advantages offered by the system.

It is observed that there are audit, surveillance, and control mechanisms that serve the purpose of ensuring transparency and reliability in the Private Pension System.

It is observed that the audit, surveillance, and control mechanisms which serve the purpose of ensuring transparency and reliability in the Private Pension System, where it is possible to earn the right to retirement, provided that individuals stay in the system for 10 years from the first entry date and they reach the age of 56, are operated by the Insurance and Private Pension Regulation and Supervision Agency, the Capital Markets Board, Pension Monitoring Center, Takasbank, and independent audit companies.

Participants in the Private Pension System benefit from professional fund management services, and the BEFAS application also provides the opportunity to invest in the funds of different pension companies.

In the PPS application, where there is the opportunity to choose funds with or without interest, fund distribution changes limited to 12 times a year and pension plan changes limited to 4 times a year are in question, the savings of the participants are professionally managed by the portfolio management companies audited by the Capital Markets Board in pension mutual funds. As a result of the application of the Pension Fund Trading Platform (BEFAS), an electronic platform where pension mutual fund shares are traded, as of July 2021, participants in the system have been given the opportunity to invest in the funds of different companies without changing the pension company they have contracts with. 
The data of March 31, 2022, shows that the number of participants exercising their right to retirement is 175,258, and considering the current data of May 18, 2022, it is noteworthy that 7,677,9555 people are voluntary PPS participants and the total fund size amounts to TRY 269.3 billion.

Ramazan Baş
 

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