AUTO ENROLLEMENT
FREQUENTLY ASKED QUESTIONS

FREQUENTLY ASKED QUESTIONS

When is auto-enrollment going to be launched?

It's expected to start on 1 January 2017. The auto-enrollment legislation was adopted by the Plan and Budget Commission of Turkish Parliament and the General Assembly. The system will become clear when the Undersecretariat of the Treasury publishes the secondary legislation.

Who will be covered by auto-enrollment?

Salaried employees under 45 years of age (registered with the Social Security Institution (SGK)) will automatically be included in a pension plan through their employers.

Will public sector employees join the system, too?

Employees in both the private and public sectors who have not completed 45 years of age will be included in the system.

Will auto-enrollment be applicable to all companies?

The legislation authorizes the Cabinet of Ministers in this respect. The Cabinet will perform the necessary arrangements.

Will the employees be allowed to make a choice among pension firms?

The employees will be included in the pension plan by their employers. The employers will be allowed to make a choice among the pension firms endorsed by the Undersecretariat of the Treasury.

Is there anything in the works for older-than-45 employees who already have a pension contract and those who are already in retiree status?

Age 45 is the cutoff in the legislation. There's no rule, however, against individuals older than 45 joining the system by submitting a request to their employer.

Are the conditions for retirement the same as those in the existing contracts under the Private Pension System?

To be eligible for retirement, one has to stay in the system for a minimum of ten years and complete 56 years of age. There's no difference from the current practice as far as eligibility for retirement is concerned.

How much will the contribution be with auto-enrollment?

The minimum premium to be paid as employee contribution is 3% of the basic emoluments. The employee may increase this amount if they wish to build up greater savings for retirement or to receive greater state contribution within the legally set limits. There will be no employer contribution.

Can I make a change in my contribution?

The employee may request their employer to set a greater amount in the auto-enrollment contract than was initially entered provided that the requested amount is not lower than 3% of the emoluments.

Will the participants have the right to withdrawal?

A participant may end up the contract within two months as of the date of notification of inclusion in the pension plan.

What rights do I stand to lose if I exercise my right to withdrawal?

There are no specific provisions about this in the legislation yet.

Can I suspend the payment of my contribution?

Yes, contribution payments may be suspended. The conditions for suspension are expected to become clear once the relevant regulations are available from the Undersecretariat of the Treasury.

Can I carry my existing private pension contract over to my auto-enrollment contract?

The existing private pension contracts (individual &group) will not be included in the auto-enrollment system.

I currently have a contract. Am I going to be included in auto-enrollment?

Individuals with an existing private pension contract who are employed in the private or public sector and are below 45 years of age will be included in the auto-enrollment system and will be allowed to keep their existing contracts.

What's going to happen to my contract in my former work place if I change work places?

In the event that an employee with a private pension contract changes their work place, their savings and the years they earned which will count towards their length of service required for retirement will be carried over to their private pension contract in their new work place provided that auto-enrollment is available in the new work place. If there is no pension plan in the new work place, the employee may, if they wish, continue paying contributions under the contract that was drawn up in their former work place.

How much fee is to be applied to auto-enrollment contracts?

Although not announced for certain, Fund Management Fee will most likely be imposed. Its rate is yet unknown. Information on what funds will be included in the system is not yet available, either.

Will there be a change in the state contribution? Will the 25-percent state contribution in the existing system remain in auto-enrollment? Will there be any supplementary contribution to the state's 25%?

An amount equal to 25% of the contribution a participant pays will be matched by the state.

In addition to %25 state contribution, the state will provide a one-time contribution of TL1,000 upon joining the system provided that the employee does not use their right to withdrawal.

Should an employee decide to exercise their right to retire, they will receive an additional state contribution equal to 5% of their savings if they opt to receive the savings in their account under an annuity contract with a minimum term of ten years.

Will there be a change in the existing conditions for receiving the 25-percent state contribution?

There's no change in the time periods used in calculating the 25-percent state contribution.

Minimum number of years spent in the system as of 1 January 2013 Percentage of state contribution and accrued income to be received upon departure from the system
3 15%
6 35%
10 60%
Departing the system after 10 years having completed 56 years of age or due to death or disability 100%
Is the TL1,000 state contribution applicable only to the contracts enacted after 1 January 2017? Will the TL1,000 state contribution be applicable to the existing contracts, as well?

The TL1,000 supplementary state contribution is applicable only to the auto-enrollment contracts and will be given for one time only upon joining the system.

The TL1,000 supplementary state contribution will not be applicable to the existing contracts.

Is there a requirement to pay a certain annual amount to be eligible for the TL1,000 state contribution? Will everyone who doesn't exercise their right to withdrawal get to receive the state contribution?

State contribution in the amount of TL1,000 will be given for one time only upon joining the system provided that the employee does not use their right to withdrawal.

What are the obligations of the employer?

The legislation assigns employers the obligation to include their employees under 45 years of age in a pension plan on an auto-enrollment basis. The contribution for the pension contract is to be transferred to the private pension firm by the employer on the work day following the employee's payday at the latest. The employer will be responsible for any monetary loss incurred to the employee's savings, if any, caused by the employer's delay in transferring the contribution to the private pension firm on time or his failure to effect the transfer.

What are the conditions for leaving the system?

A participant leaves the system when they retire. The participant receives their savings in person in the event they become disabled and their legal heirs receive their savings in the event the participant dies. The legislation does not include any other provisions for leaving the system. More details are expected to be available pending the regulations to be announced by the Undersecretariat of the Treasury.

What's going to be the upper limit to the state contribution to be paid to a participant who has two separate contracts? Will the state contributions to the two contracts be considered separately with respect to an upper limit?

The upper limit to the state contribution is equal to 25% of the gross annual minimum wage for all participants. This figure is inclusive of the state contributions to both the auto-enrollment contracts and the private pension contracts. In the event that an employee with an auto-enrolled pension contract changes their work place, their savings and the years they earned which will count towards their length of service required for retirement will be carried over to their private pension contract in their new work place provided that a pension plan is available in the new work place. If there is no pension plan in the new work place, the employee may, if they wish, continue paying contributions under the contract that was drawn up in their former work place. If the employee does not wish so, their pension contract will be terminated. The state will provide an additional one-time contribution of TL1,000 upon joining the auto-enrollment system

Would the individuals who currently participate in the Private Pension System sustain losses if they terminated their existing pension contract and carried on with auto-enrollment?

Yes, they would. Auto-enrollment does not provide for any arrangements concerning your existing Private Pension System contracts in any way whatsoever. Therefore, we strictly advise against terminating your Private Pension System contracts so that you won't lose your accrued rights such as time span and state contribution and that you prolong the effective duration of your contract on which your gains from state contribution will be based.

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