Final stages of the new pension system: Will severance pay be abolished?

The Ministry of Labor and Social Security is preparing the regulation for the Supplementary Pension System, which will be implemented next year, to create additional income in retirement and ensure the maintenance of living standards from the working period.

According to a report by the pro-government newspaper Sabah, the system aims to generate a volume of over 200 billion annually. According to the schedule in the Medium-Term Program, the legal regulation regarding the second-tier pension system will be completed in the last quarter of 2024. A Supplementary Pension System will be established, in which the automatic enrollment system will transform into a second-tier pension system with the contribution of employers.

30 PERCENT CONTRIBUTION WILL BE PROVIDED

In Turkey, public pension and the third-tier BES (Private Pension System) are currently in practice. The TES is being designed as a second-tier pension system. With the new model, both the amount of funds in the system and the duration of stay for those entering the system will increase, and a model supported by employers will be implemented. Unlike individual plans, supplementary pension will be created through funds for employees within companies or institutions. As in the BES, a 3 percent deduction will be made from the employee's salary, the employer will contribute at the same rate, and the state is expected to provide a 30 percent contribution. Some support will also be provided to employers who contribute to the system.

GRADUAL EXIT RIGHT ON THE AGENDA

Within the scope of the package, the strengthening of sector, line of business, or profession-based supplementary pension institutions will be ensured. Best practice examples of sector, line of business, or profession-based supplementary pension institutions will be disseminated. Employees exiting the system upon reaching retirement age and the right to a gradual exit are also among the options.

NO CHANGES TO SEVERANCE PAY

Cash contributions made by the employee, employer, and the state to the employee's individual account will be directed to pension investment funds. The employee will be able to decide on the selection of these funds and the distribution of the unit among the funds. Savings will be evaluated through pension investment funds. The employee will make the fund selection themselves, and the real return will be formed accordingly. The Supplementary Pension System does not include any regulation regarding severance pay, unlike the Private Pension System. There will be no changes to the rights regarding severance pay.

THE AGE 60 DETAIL

The age of 60 stands out in the supplementary pension. When an employee reaches retirement age, they will retire from the Social Security Institution, and additionally, upon reaching the age of 60, they will receive a second pension within the scope of the TES. Both pensions will be received without any deductions or proportional reductions. Payments will be made based on the premiums in the fund account when the age of 60 is reached, regardless of whether the employee has worked for ten years or 25 years.

News Source: 12punto