Ratio of pension to minimum wage: The lowest in the last 20 years

Approximately 15 million retirees have their eyes on the raise rate to be announced by the government. According to official data, 2023 was the most difficult year for retirees in the last two decades.

According to official data, the worst period for retirees in the last 20 years was 2023. The ratio of the lowest pension to the minimum wage has never been this low since 2003. 

In 2003, the ratio of the lowest 4a pension to the minimum wage was 1.47. In other words, the lowest pension was 1.5 times the minimum wage. In the second half of 2023, this ratio fell to 0.66. This means the lowest pension is two-thirds of the minimum wage.

Since the base pensions for some retirees are quite low, the Ministry of Treasury and Finance (HMB) tops this up to 7,500 liras. Raises, however, are applied to the base pensions. 

According to a report by Euronews, if the government does not increase this amount topped up by the HMB, even if the raise rate is 50 percent, the actual raise that millions of retirees will receive will remain below that. The salaries of some retirees may not increase at all despite a potential high raise, and these individuals may continue to receive 7,500 TL.

Official inflation announced by TUIK was 34 percent in the last five months as of November. With the announcement of December inflation, the last six-month inflation figure will be revealed.

The actual salary of retirees is called the “base pension.” According to Social Security Institution (SGK) data, for example, the lowest 4a base pension in the second half of 2023 is 7,324 TL. In 4b, the lowest base pension is divided into two groups. These are 6,558 liras and 5,163 TL. In 4c, the lowest base pension is 9,497 liras.

In recent years, because the lowest pension has remained quite low, the government has been supplementing it with Treasury support. Currently, the lowest pension payment is 7,500 liras.

Raises are applied to the base pensions. That is, the raise will not be applied to the 7,500 lira figure.

WHAT HAPPENS IF THERE IS A 50 PERCENT RAISE ON BASE PENSIONS?

So, what would the lowest pension be if the government grants a 50 percent raise to retirees? To calculate this, one must look at the base pensions.

In this case, the lowest 4a pension becomes 10,986 liras. In 4b, it rises to 9,837 liras in the first group, while in the second group, this salary amount becomes 7,744 liras. 4c salaries become 14,245 liras.

In this scenario, even if a 50 percent raise is granted, how much do the salaries actually increase? The increase rate in 4a is 46.5 percent. While the increase rate in the first group of 4b is 31.2 percent, it is only 3.3 percent in the other group. The actual increase rate in 4c corresponds to 50 percent.

If the government does not update the “supplemented” salary of 7,500, a great disappointment awaits retirees, especially those in 4b. If the raise rate remains below 45 percent, the salaries of retirees in 4b whose base pensions are 5,163 liras will not effectively increase.

How many retirees does the lowest pension concern?

So, how many retirees are there whose base pension is below 7,500 liras and who receive a 7,500 lira salary with Treasury support?

Within the scope of improvements made for retirees by the Ministry of Labor and Social Security; the lower limit for pensions, which was introduced as 1,000 TL in 2019, was increased to 1,500 TL in 2020, and then to 2,500 TL in January 2022. The lower limit for pensions, which was raised to 3,500 TL as of July 2022, was increased to 5,500 TL as of January 2023.

As of the April 2023 payment period, the pensions paid on a file basis were increased to 7,500 liras.

According to the SGK's statement in March 2023, 8.8 million retired citizens were to benefit from this regulation. With most of those who define themselves as “Those Stuck in Retirement Age” (EYT) also retiring, this number may have increased slightly. This means more than half of the total number of retirees.

Even if the Treasury-supported lowest salary of 7,500 liras is effectively increased by 50 percent again through an update, the lowest pension will be 11,250 TL. Considering that the minimum wage, which has not yet been raised, is 11,402 liras, how retirees will manage to get by even with this overly optimistic raise is a big question mark.

HOW MANY RETIREES ARE THERE?

According to SGK data from September 2023, the number of retirees is 14,958,820 on a file basis; and 15,751,971 on an individual basis.

9.98 million of the retirees are 4a. 2.68 million are 4b; and 2.29 million are 4c type retirees.

Retirees experienced the worst period in the last 20 years in 2023

According to SGK data, the worst period for retirees in the last 20 years was 2023.

In 2003, the ratio of the lowest 4a pension to the minimum wage was 1.47. In other words, the lowest pension was 1.5 times the minimum wage. In the second half of 2023, this ratio fell to 0.66. That is, the lowest pension is two-thirds of the minimum wage.

News Source: 12punto