By revising the private pension system the government expects to encourage more citizens to increase their savings. According to the new law, with the exception of payments made by the employer to pension plans, the government will estimate the contribution of individuals to their private pension plans -- also know as Bireysel Emeklilik Sistemi (BES) in Turkey -- and match 25 percent of the total payments made by each person. In other words, the state will add an extra TL 25 to every TL 100 deposited in the system, creating additional savings for citizens. This action is expected to promote savings among people in order to provide sustainable long-term growth for the economy.
The Undersecretariat of the Treasury is responsible for overseeing the calculation of each payment. The 25 percent government contribution will be separately monitored by the undersecretariat and directed to investment funds determined by that body. Those who stay in the system less than three years will not be able to receive any funds after they retire. However, those individuals remaining in the system for more than three years will be entitled to receive a 15 percent government contribution.
Meanwhile, those who stay in the system for at least six years will be able to collect 35 percent, and those who stay for at least 10 years will be eligible for 60 percent of the additional funds. Only those who meet the requirements for BES will be entitled to receive the full amount of funds, in addition to those who leave the system due to disability or death. The new legislation will also ensure participants in the scheme are exempt from inheritance and related taxes on the sum paid by the Treasury. The new legislation also includes annulment of the withholding tax on the trading of investment funds more than 75 percent of which comprise equities, 100 percent for institutions such as the Scientific and Technological Research Council of Turkey (TÜBİTAK) and the Small and Medium Industry Development Organization (KOSGEB), as well as companies whose projects are supported by the government and ministries. According to the new arrangement, the government will not receive withholding tax from the sale or acquisition of investment funds where the share of equities (or stocks traded on the stock market) is less than 75 percent. However, one of the requirements to qualify for this is that shares are held for at least two years.
