The pension system is changing: Here are all the details of the new system
It is stated that the pension reform, which has been on the agenda for some time, will be addressed in the new legislative term. While there is talk of transitioning to a fairer practice in the social security system, how the reform will be implemented and what it will include remain a subject of curiosity.
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The Turkish Statistical Institute recently announced its population projections for 2023-2100. According to these figures, one in every three people will be elderly by 2075. The working-age population ratio, which stood at 68.3 percent in 2023, is expected to decline to 61.9 percent in 2050, 55.9 percent in 2075, and 54.6 percent in 2100.
Hürriyet columnist Noyan Doğan, who reported on the trend of the elderly population's ratio to the total population in Turkey over the years, explained what this means as follows:
In the future, there will be fewer workers and more retirees. Today, the active-to-passive ratio in social security is 1.65. To put it more clearly, 1.65 workers are currently financing one retiree.
According to this projection by TÜİK, there will be no workers left to finance retirees in the future. In this scenario, the social security system will become unsustainable, and even the payment of pension benefits will be at risk.
To ensure the sustainability of the system, it is proposed that the parameters forming the basis for pension payments be automatically updated based on criteria such as the average age of the population, employment, and the working-age population.
Retirement criteria and the retirement age will be automatically adjusted in line with life expectancy and the ratio of the number of retirees to the number of employees. Additionally, the pension replacement rate (ABO) will be subject to a restructuring.
For today, the Pension Replacement Rate (ABO) varies between 28 percent and 76 percent depending on the number of premium days and whether the insurance entry was before 1999, after 2000, or after 2008. For those who became insured after 2008, the ABO rate drops to as low as 40 percent.
Beyond the change in the monthly accrual rate, automatic adjustment has another pillar in pension reform: the supplementary pension system that has been discussed for some time.
Employees will be included in the supplementary pension system by their employers; the employer, the employee, and the state will all contribute. Thus, a system will be structured to complement the social security system.
Employees will not be able to withdraw from the system without meeting certain criteria, and savings will be accumulated for the retirement period; when an employee reaches retirement age under social security, they will also retire from the supplementary system, thus receiving both a pension from the state and either a monthly payment or a lump sum from the supplementary pension system.
Work on the supplementary pension system has begun and has even reached a certain stage.