A new era in the Private Pension System (BES): Contracts as loan collateral

With the new regulation that came into effect as of January 1, 2024, Private Pension System (BES) participants will be able to use their contracts as collateral to banks to obtain loans with favorable interest rates and terms. This practice began with a regulation introduced in March 2023.

BES participants will be able to transfer a portion or all of their savings, excluding state contributions, to a bank through an assignment of receivables agreement. A participant requesting a loan will apply to the bank, and the bank will inquire with the Pension Monitoring Center (EGM) to determine whether there is a sufficient amount available for the assignment of receivables or to verify the total transferable amount of the participant.

The EGM will provide the bank with the data and information necessary for the allocation of the loan. Once the participant utilizes the loan, the amount to be transferred to the bank will be directed into an assignment of receivables fund by the pension company.

30 DAYS GRACE PERIOD FOR NON-PAYMENT

Regarding payments, if a participant fails to pay two consecutive installments of the debt, the bank will grant the participant a 30-day grace period. If payment is not made within this period, the bank will collect the remaining debt amount from the assignment of receivables fund. In the event of the participant's death, the bank will request the remaining loan balance from the pension company, and the outstanding debt will be paid to the bank from the assignment of receivables fund.

A BES contract can be used as collateral for a loan from a single bank, or multiple BES contracts can be pledged as collateral to a bank. However, employer-sponsored group pension contracts cannot be transferred to a bank. When a BES contract is used as collateral to obtain a loan, the BES contract cannot be canceled, nor can the savings be transferred to another pension company.

News Source: 12punto