Regulation affecting millions: Pension calculation and raise system are changing

While it is stated that the number of files receiving retirement, widow, and orphan pensions under the Social Security Institution (SGK) in Turkey is approaching 17 million, it is reported that a commission established to change the pension calculation method and the raise system has begun its work.

HOW IS THE PENSION DETERMINED?

In the current system, pensions are calculated according to three separate periods: Before 1999, between 2000-2008, and after 2008. The application of different Pension Accrual Rates (ABO) and coefficients for each period creates a relative advantage, especially for those who worked for longer periods before 1999.

WHICH FACTORS AFFECT PENSION CALCULATIONS?

According to the pro-government newspaper Sabah, the calculation takes into account the insured person's earnings subject to premium (SPEK), the pension replacement rates (ABO) that vary by period, the previous year's update coefficient, inflation data, 30 percent of economic growth, and the current year's inflation increases. Furthermore, attention is drawn to the need to simplify the system, reduce differences in raises, and strengthen the actuarial balance.

DIFFERENT PERIOD, DIFFERENT FORMULA

It is stated that performing separate calculations for three different periods creates imbalances between pensions. Proposed solutions include transitioning to a single calculation model and applying a fixed pension replacement rate (ABO) in the premium-based system.

DIVERGENCE IN THE RAISE MECHANISM

While SSK and Bağ-Kur retirees receive raises based on the six-month inflation rate, civil servant retirees' increases are determined according to collective bargaining agreement provisions. It is reported that this situation creates differences in raise rates. It is stated that a common increase system for all retirees or a model based on monthly inflation instead of six-month periods is being discussed.

HOW DETERMINATIVE IS THE DURATION OF WORK?

In the current structure, it is noted that the amount of premiums paid has a stronger impact on the pension, while the total number of days played a limited role. Therefore, it is recorded that there are instances where a person who has worked for a longer period can receive a lower pension than someone who has worked for a shorter period. It is suggested that the number of days should be reflected more strongly in the pension and that staying in the system should be made "more attractive."

WHY DOES THE YEAR OF RETIREMENT MAKE A DIFFERENCE?

It is stated that the salary difference between the year of retirement and the following year stems from variable parameters such as inflation and growth included in the update coefficient. By determining a fixed update coefficient, the goal is to reduce the difference between years and prevent debates over "retirement dates."

SIDE EFFECTS OF THE BASE SALARY PRACTICE

It is noted that while the base salary practice implemented since 2019 provides an advantage for those receiving low pensions, it leads to new imbalances for salaries just above the base. Options being considered include abolishing the base salary and implementing gradual flat increases to base pensions, or introducing gradual increases for higher brackets if the base is to be maintained.

INSTITUTIONS MERGED, BUT RULES REMAINED DIFFERENT

Although social security institutions were consolidated under the SGK umbrella in 2008, it is stated that "norm unity" has not been fully achieved. It is reported that differences in retirement conditions and pension calculation methods persist, and in this context, regulations to equalize the SSK and Bağ-Kur systems, as well as reducing the premium requirement for Bağ-Kur from 9,000 days to 7,200 days, are on the agenda.