Recently, with gold reaching historic record levels, those who allocated their funds to gold within the Individual Pension System (BES) achieved substantial gains. As a result of the rise in gold, BES participants invested in gold funds recorded a return of 14.73% in the first seven months of 2020.
Gold Rallies, Funds Rise
Thanks to the sustained surge in gold prices, participants who managed their individual pension funds through gold have seen the highest returns so far. Individuals who joined the Individual Pension System at the beginning of 2020 and placed their funds in gold funds earned 14.73% through the end of July — a seven-month period. When the inflation rate for the same period (6.37%) is taken into account, the pension funds delivered a real return of 8.36%.
During the same period, returns for interest-bearing pension funds were 11.36%, while returns for interest-free (sharia-compliant) funds reached 39.22%. Compared with inflation, participants who invested in interest-bearing funds outpaced inflation by about 5 percentage points, while those who chose interest-free funds exceeded inflation by roughly 32 points.
Savings in Deposits Eroded
Looking at other investment instruments within the Individual Pension System, deposit interest rates between January and the end of July were only around 5%. After adjusting for inflation, savers who left their money in deposit accounts experienced a real loss of approximately 1.36 percentage points. In that sense, savings kept in deposit funds effectively eroded. Participants who invested their pension funds in equities faced nearly a 5% loss, which translates to a real loss of more than 11% when compared to inflation.
In contrast, BES participants who invested in gold funds achieved a nominal return of 51.27%, while those who evaluated their savings in dollars obtained a 16.72% nominal return. Based on the first seven months of 2020, after gold and foreign currency, pension funds provided one of the largest gains. For example, a participant who joined the Individual Pension System at the start of 2020 with 1,000 Turkish lira would have about 1,083 lira in real terms by the end of July, after accounting for inflation. By comparison, savers who invested in deposits would have seen their 1,000 lira fall to about 986 lira.
Historic Record in Gold Funds
Participants who allocated their pension funds to gold have achieved the highest returns to date, setting records. According to data published by the Pension Observation Center (Emeklilik Gözlem Merkezi, EGM), gold funds delivered nearly 52% returns from January through the end of July, prompting many participants to favor gold-based funds. Variable participation funds offered BES participants returns of just over 20% during the same period.
One crucial point for those in the Individual Pension System is that these results depend on proper fund management. Since BES is essentially a savings program, failing to perform regular reviews and adjustments after enrollment can make it difficult for participants to receive the retirement income they expect or have calculated. BES participants should monitor current data and decide which asset classes to allocate their funds to. While recent data show that participants investing in gold and foreign currency achieved significant gains and may indicate that short-term investments in those areas could be advantageous, any fund changes should still be evaluated carefully by the participant, taking market conditions and potential risks into account.