Retirement is an important phase for everyone. During their working years, people join systems that secure their income when they leave the workforce. One of these is the Individual Pension System. In this article we will discuss how to calculate pension savings.
Those who want to retire must pay contributions regularly and meet the required conditions. Individual pension plans are another important element of retirement. Before we examine pension savings calculation, here is an overview of the Individual Pension System.
Individual Pension System
The Individual Pension System was created so workers can maintain their standard of living after retirement. Through this system, participants build a supplementary income proportional to their contributions. The system is supervised by the Pension Monitoring Center, the Capital Markets Board and the Treasury.
Although participation in the Individual Pension System was initially voluntary, automatic enrollment was introduced at the beginning of the year. The requirements to join the system are as follows:
- Being a Turkish citizen.
- Being under 45 years of age.
- Working under Article 4 of the Social Insurance and General Health Insurance Law.
There is an online portal for Individual Pension System transactions where you can find official information and complete procedures.
Automatic enrollment for individual pensions came into force on January 1, 2017. Employees can be enrolled automatically through their employers.
Participation via automatic enrollment does not remove the right to opt out. Participants who wish to leave the system must apply and request withdrawal.
There are three ways to withdraw savings from the Individual Pension System:
- Lump Sum Payment: Savings can be withdrawn as a single lump-sum payment.
- Programmed Payout: Savings can be received as scheduled payments determined by the participant and taken as a retirement income.
- Life Annuity: Savings are paid out as a lifelong pension.
Advantages of the Individual Pension System
As you will see when calculating pension savings, this system offers several benefits, including:
- Plans suitable for different budgets.
- Participants can choose their payment frequency.
- Payments can be paused and resumed later without losing prior contributions.
When employers enroll employees, they select an insurance company and a fund for the contributions. Many pension companies operate in the market; the better-known ones include:
- Aegon Pension and Life Joint Stock Company
- Vakıf Pension Joint Stock Company
- Asya Pension and Life Joint Stock Company
- Ziraat Life and Pension Joint Stock Company
- Groupama Pension Joint Stock Company
- MetLife Pension and Life Joint Stock Company
- Allianz Life and Pension Joint Stock Company
- Halk Life and Pension Joint Stock Company
- Anadolu Life and Pension Joint Stock Company
- Avivasa Pension and Life Joint Stock Company
- Axa Life and Pension Joint Stock Company
- Allianz Life and Pension Joint Stock Company
- Cigna Finans Pension and Life Joint Stock Company
- BNP Paribas Cardif Pension Joint Stock Company
- Garanti Pension and Life Joint Stock Company
- Fiba Pension and Life Joint Stock Company
- NN Life and Pension Joint Stock Company
- Participation Pension and Life Joint Stock Company
These are some of the companies operating within the system. Next, we will explain how to calculate your pension savings.
Pension Savings Calculation
It is important to know how much you are likely to accumulate in an individual pension plan. For pension savings calculation, the Pension Monitoring Center (Emeklilik Gözetim Merkezi) provides a calculation tool that estimates potential savings.
To use the tool, follow the link provided at the end of the original article. After opening the tool you will see a form requesting information such as your current age, planned retirement age, monthly contributions, any lump-sum payments and your tax bracket.
Enter these details to perform the pension savings calculation. Pay attention when filling in your information: if you do not select the fund that matches your plan, the annual contribution rate can vary and your estimate may be inaccurate. Choosing the correct fund will help produce a more reliable calculation. To adjust additional settings, click on the “Extra Parameters” section. In the additional screen you can enter management fee deductions, expected annual increase in contributions and other parameters to refine the calculation.