TURKEY - Private pension assets in Turkey are likely to “snowball” over the next few years from the current TRY9.3bn (€4.5bn), according to Turkey’s deputy prime minister Ali Babacan. This comes just as Dexia may be thinking of selling its Turkish pensions arm.
Celebrating the sixth anniversary of the pensions system, Babacan yesterday said private pension assets have started forming a significant part of private savings in Turkey.
“We expect the assets in the system to snowball in the future, together with the growth of the existing fund volume and new entrants to the system,” he said. “Having two million participants in the private pensions system while there are eight million pensioners in Turkey is not an unimportant figure,” said Babacan.
At present, Turkey’s private pensions system consists of 13 companies offering a range of 128 funds.
Mete Ugurlu, chairman of Turkey’s Pensions Monitoring Center (EGM), said the 13 companies operating in the sector have set a goal to have four million participants and TRY48bn in assets by 2015.
“By 2020, it is likely the system will have grown even further, and reached 5.5 million participants and assets of TRY115bn,” said Ugurlu.
Turkish pension funds have yielded particularly healthy returns over the last year, despite the turbulent market environment. At the end of 2009, 69% of the funds were invested in government bonds, 15% in corporate bonds, 10% in stocks and the rest in money markets, foreign securities and other investments. Real return stood at 14.1% of holdings, and the average return at 21.6%.
Babacan also noted that only Turkey’s pension funds had the highest nominal return among OECD countries last year.
“In the past two years of the financial crisis, there have been major drops in the returns of pension assets all around the OECD area. In 2008, Turkey, Korea and Germany were the only three countries to make returns from pension savings. With 12% returns in the first half of 2009, Turkey’s pension funds performed best in the whole OECD,” said Babacan.
That said, pension assets amount to only 1.7% of Turkey’s GDP.
“For the system to reach the same level as in Poland and Mexico, where the ratio is at 10% of the GDP, the asset volume of the system would need to reach at least TRY100bn,” noted Babacan.
New players in the market are also expected to enter the sector. Hakan Ateş, chief executive of Denizbank, hinted on Wednesday that the bank’s parent company, Dexia, may consider selling its recently-launched private pensions arm Deniz Emeklilik.
“We are waiting for a signal from Dexia Group. This is the framework in which the issue is proceeding. There will be a lot of interest [in Deniz Emeklilik],” said Ates.
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