The Turkish government is planning to introduce a number of private sector pension schemes involving a projected investment of $10bn, according to Yasar Okuyan, Turkey’s Minister of Labour and Social Security.
At a briefing on the British pensions system last month by the Society of Pension Consultants (SPC), Okuyan confirmed that changes were in the pipeline: “It is the stated aim of the government to spread the social security and health systems to the whole population, providing efficient systems whose financial resources are certain.”
The plans include proposals to separate the health and pension ministries and bring the fragmented pension fund system under one regulatory umbrella subject to homogenous standards.
The move towards private schemes has been prompted by government reports showing a negative growth in the ratio of active and passive members of pension funds.
SPC Secretary John Mortimer says the Turkish delegation revealed little of their plans during their fact-finding visit: “It was more a question of us talking and them listening.”
First indications are, however, that the Turkish minister was impressed by the visit, and that he intends to press ahead with radical reform to protect the interests of both present and future pensioners.
Turkey’s most important state funds are the Sosyal Guvenlik Kubukusu (the social security institute SGK), which covers workers, and the pension fund of the Republic of Turkey (PFRT), which looks after civil servants.
These are followed by four other institutions the largest of which is made up of tradesmen and the self-employed.
A number of major private funds also cater for employees of the banking and insurance industries.
The active-passive ratio for the civil servants’ scheme is 1.79. The SKG ratio is 2.33 and the level reaches a worrying 2.72 among the self-employed.
With the SGK accounting for 51% of all insured, pensioners and dependents and the PFRT catering for a further 18.5% the government is understandably worried. Last available figures show 93% of the nation covered by schemes.
And with just 6.25m pensioners in a nation of 65m the figures are a little confusing. They are explained, however, by the population boom and the slow increase in contributors. Turkey also had traditionally one of the more generous welfare states with low retirement ages.
The state has been moving over the past few years to increase the retirement age, often in the face of union opposition. Most of the political spectrum acknowledges now, however, that age bands will have to move closer to other European countries, particularly if Turkey is to make progress on its European Union ambitions.
Article 60 of the Social Security Administration Law 506, which came into being in September last year increased the age of retirement to 58 for women (up from 50) and 60 for men (increased from 55).
Currently eligibility depends upon age, years worked and contributions. There are also special provisions for those who are deemed to have “prematurely aged” following work underground in Turkey’s mines. The level of pensions is calculated on a “best earnings” basis involving a calculation of the top three years earnings over the five years up to retirement. A pension of 70% of this mean figure is then paid. Kevin Hall