Two formulas emerge for pension differences: Will pensions decrease?

The government has taken action due to the difference in the update coefficient affecting pension payments.

There is particular concern regarding whether citizens who will receive their first pension in 2025 will experience a pension gap that could reach up to 30 percent.

So, what will be the details of the work being done regarding the pension gap? What is the prominent figure in the pension update coefficient?

RETIREMENT PENSION CALCULATION

According to a report in Sabah, various methods are used when calculating retirement pensions.

First, retirement pensions are determined based on the premiums paid by multiplying them by separate monthly accrual rates for three distinct periods. They are then updated using the previous year's inflation and growth figures. While the monthly accrual system is applied in the same way for all retirees, the update coefficients also change every year.

Therefore, a difference of up to 30 percent emerges between those who will retire in 2024 and those who will retire in 2025. Thus, retiring in 2024 becomes more advantageous.

This is because the 2023 inflation and growth figures used for those who will file a petition in 2024 are higher than the 2024 inflation and growth rates that will be used for those who will retire in 2025.

WILL PENSION PAYMENTS DECREASE?

Claims that 'all pension payments will decrease by 30 percent in 2025' have spread. However, the issue has nothing to do with current pension payments. It is a calculation method that concerns only those who will retire in the future. After this issue was brought to the agenda, a search for a permanent solution began to eliminate the discrepancy and prevent such a difference from occurring in the coming periods.

The Ministry of Labor and Social Security and the Ministry of Treasury and Finance are continuing their work on this matter. Once the figures emerge, the issue will be brought to the Grand National Assembly of Turkey (TBMM), and the problem will be resolved through a regulation.

PROMINENT FORMULA FOR RETIREMENT PENSIONS

The primary solution to the issue is to determine the update coefficient as a fixed figure that prevents year-to-year fluctuations. This way, when all retirement pensions are updated, there will be no year-to-year discrepancies, and such debates will not occur. Looking at the calculations, the update coefficient for those retiring in 2024 is 1.6612, excluding annual raises. For those retiring in 2025, it is 1.4255, calculated based on inflation and growth projections. The average of these two figures is 1.5433. This average could be taken into account for these two years, but a new figure needs to be determined for subsequent years. The prominent solution here appears to be adopting the highest update coefficient. The content of the regulation to be made in the Grand National Assembly of Turkey (TBMM) on this matter will be clarified based on the results of the impact analysis to be conducted.