Recent reports that pension funds within the private pension system might be transferred to private companies have unsettled participants, while experts offer differing opinions. Some specialists argue that, due to how the system is structured, it is not possible to seize or simply transfer those funds.
The Puzzle of Transferring Funds
Remarks made by President Erdoğan at the Turkey Insurance Promotion Ceremony recently raised concerns among private pension savers. Referring to the funds, he said: “With state support and incentives, the private pension system’s fund balance reached 154 billion lira; with the right steps, a large, long-term and low-cost source for the real sector can be created.”
That statement sparked debate over whether the accumulated savings in the private pension system would be lent to the private sector as credit, and whether such a move would harm the system. Some savings and pension experts warned that confidence in the system could erode and that investments to date might be wasted. This is not a brand-new issue: the 11th Development Plan adopted by Parliament in July 2019 already included a provision to “increase savings opportunities within pension funds and encourage directing the resources formed in these funds to industrial growth.” Likewise, the 2020 Presidential Annual Program called for increasing savings opportunities in pension funds and encouraging directing those accumulations toward industrial expansion.
What Is the Aim of Encouraging Resources?
The language in these documents shows that while individuals are the base for increasing savings, the economy is the primary focus. When the economy receives long-term financing, investments are supported and capital markets deepen, growth can be achieved and vulnerabilities to domestic and external shocks typically decline. Put another way: if the total size of funds in the private pension system were around 500–600 billion lira, exchange rate fluctuations would have less severe effects.
For this reason, some experts consider it unlikely that pension funds could be seized or diverted to other channels. The private pension system operates through pension companies that provide security and regulated management. In its simplest form, participants enter the system by paying a monthly premium to a pension company. That company offers pension funds and alternatives in which participants’ savings will be invested. Participants choose the funds. Premium payments are forwarded to portfolio management firms selected by the pension company, and accumulated contributions are managed by those portfolio management firms.
Funds Are Already Managed by Companies
Experts note that private pension funds are already managed by companies. The funds typically hold repo, government bonds, interest-bearing instruments, treasury bills, equities, foreign currency and gold—assets that already provide resources to the firms managing the premium payments. Contributions are allocated within funds across those investment instruments. Pension accounts and fund assets are also held at Takasbank. All these processes are supervised by the Pension Monitoring Center, which prevents revaluation or transfer of participants’ funds without their consent.
Some specialists also emphasize that savings within the private pension system are not accumulated in a single pool and therefore are protected against external intervention or seizure. Under the current setup, the private pension system is designed to provide long-term returns and to prevent appropriation of accounts by the state or other parties. Today, private pension accumulations exceed 156 billion lira.