The conditions of the Individual Pension System are regulated by law, and citizens who do not meet these requirements cannot benefit from the program. The Individual Pension System (BES) primarily requires Turkish citizenship.
Other conditions required to benefit from BES are as follows.
- To participate in BES, the employee must be under 45 years of age.
- The employer must have an agreement with a pension company and choose the fund on behalf of the employee.
- Participants in BES can retire at age 56 and withdraw their accumulated savings in full. Additionally, recent regulations allow non-retired participants to withdraw cash from their BES savings when necessary.
What Is the Individual Pension System?
The Individual Pension System is a private pension arrangement designed to help workers maintain their quality of life after retirement. BES is a forward-looking savings plan for employees that aims to preserve living standards and economic well-being during retirement.
What Is the Purpose of the Individual Pension System?
The Individual Pension System is intended both to support the national economy and employment and to improve the living standards of workers during retirement.
The objectives of BES can be listed as follows.
- Increase employment in the country
- Raise the living standards of retirees
- Encourage saving during working life up to retirement
- Provide long-term support to the national economy
Is Participation in the Individual Pension System Mandatory?
Participation in the Individual Pension System is mandatory for Turkish citizens under the age of 45 who are employed. All employees who are Turkish citizens and under 45 must be enrolled in BES. Employer-mandated enrollment cannot be refused by the employee. However, remaining as an active participant in BES after enrollment is optional.
Can Participants Leave the Individual Pension System?
Although joining the Individual Pension System is mandatory, employees have a right to withdraw. An employee who has been enrolled in BES can exercise the right of withdrawal within two months after being notified of their enrollment. When a participant uses this withdrawal right, their accumulated funds up to that time are returned.
Does an Employee Need to Apply to Join BES?
An employee does not need to apply to join BES. Initiating an employee’s BES registration is the employer’s responsibility. Employers who fail to sign pension agreements or register employees for BES may face penalties. This employer obligation is periodically monitored by the state.
What Are the Employer’s Responsibilities in BES?
While ensuring employee participation in BES is the employer’s responsibility, factors such as the number of employees can affect whether an employer must include staff in a BES plan.
For employers who are legally required to enroll staff in BES, the responsibilities include the following.
- Sign pension agreements with employees.
- Report employees’ fund choices (interest-bearing or non-interest-bearing) to the pension company.
- Transfer deductions from wages to the pension company.
- Inform employees of the BES start date.
What Are the Employee’s Responsibilities in BES?
Employees have no application duties when being enrolled in BES, but they do have a two-month right of withdrawal after their participation date. Additionally, to benefit from the state contribution, a participant generally must remain in the system for at least 10 years. At age 56, participants can retire and use their savings.
How Is the Accumulated Savings in BES Calculated?
Although calculating BES savings may seem complex, it is straightforward. The basic accumulation comes from a 3% deduction of the employee’s gross salary, which increases each month by that 3% portion of salary. Employees who wish to save more may request an increase in the deduction amount.
What Is the State Contribution in BES?
The state contribution in BES is an additional payment provided by the government based on a percentage of the participant’s savings. This support is 25% of the contributions made. The state contribution is an incentive that increases the attractiveness of BES. While the contribution rate is fixed, the absolute amount increases with higher employee contributions. To be eligible for the state contribution, participants must remain in BES for more than three years; otherwise, the state contribution is not granted.
How Is the Full State Contribution Received?
The amount of state contribution a participant receives is proportional to the time they remain in the system. Participants who stay less than three years are not eligible. The state contribution share based on tenure is as follows:
- Participants who remain 3 to 6 years receive 15% of the state contribution.
- Those who remain 6 to 10 years receive 35% of the state contribution.
- Those who remain 10 years receive 60% of the state contribution.
- Participants who remain at least 10 years and reach age 56 are eligible to receive the full state contribution.
The state contribution is a significant advantage for many participants, and those who contribute consistently benefit more. Regardless of how long participants remain in the system, if they leave BES, their total accumulated savings are returned.
How Can the State Contribution in BES Be Checked?
The state contribution in BES can be checked through the e-government portal. Many details about BES, including the state contribution, are available via the official e-Government service using an identity number and e-Government password. By logging in and following the on-screen instructions, participants can view all information related to their BES account.
How Can Participants Withdraw Their BES Savings?
A participant who meets the required conditions and has reached retirement can withdraw their BES savings. Retirees may take their savings as a lump sum or receive monthly payments. If they prefer not to take a lump sum, they can arrange installment payments, typically in 3-month or 6-month intervals.
What Changes Were Made to BES in 2020?
In 2020, due to economic developments, some changes were made to BES. Under the new regulations, BES started to operate as a complement to the Automatic Enrollment System.
With this change, several features of BES were updated as follows.
- The state contribution in BES was adjusted by age; younger participants receive higher contribution rates.
- Participants were given the option to make cash withdrawals from their accumulated savings for reasons such as education or health without leaving the system.
These amendments aim to encourage longer participation in BES. Previously, participants often left the system to meet urgent cash needs; allowing partial withdrawals without full exit helps them address immediate needs while remaining in the system. Increasing the state contribution for younger participants also serves as an incentive to join and stay in BES.