INDIVIDUAL RETIREMENT, SAVINGS AND INVESTMENT SYSTEM
The Individual Retirement Law in Turkey has been legislated in parliament and published in the Official Gazette on May, 7th.
If we look at the general framework of the law we can point out the main properties of the individual retirement system as following :
I. The Main Properties of the Individual Retirement System :
- The system is supplemantary to the existing state pension plans.
- The system is voluntary and based on defined contribution plans.
- The contributions collected from the individuals are transmitted to pension funds which are established as the structure of a mutual fund.
- Anybody who is able to use his civil rights can enter the system.
- Only retirement companies (which have been introduced to the financial markets with this new law) can establish the pension funds. Retirement companies can be established with permission of Underscreteriat of Treasury. Retirement companies need an initial capital of 14.285.714 USD for establishment. Half of this amount should be paid in cash when the company begins to operate.
- At least 3 different funds with different portfolio structures must be established. (In this way individuals will be able to choose a fund according to their personal risk and yield expectations).
- Although not stated in the law clearly, both employees and employers, if any, as well as individuals can make contributions to the pension funds.
- The rights of the investors are portable and accumulations can be transferred into another retirement company.
- At retirement, the investors can take their accumulations as lump sum or they can withdraw the accumulations partially. They will have an option in either buying an annuity from an insurance company or leaving the money in the funds to be invested. Retirement age is 56 providing that, people make contributions to the fund for at least 10 years.
- The fund is managed by portfolio management companies according to the Law, which will be authorized by Capital Markets Board.
- The assets of the fund can be deposited in a custodian bank which will be approved by the Board. The custodian that is selected by the pension company and approved by the Board, can be a bank which operates in accordance with the Law on Banking.
- The system is coordinated by Advisory Board. The regulations can be made by relevant institutions, Undersecreteriat of Treasury and Capital Markets Board.
II. The Regulations of Undersecreteriat of Treasury :
Bylaw About Individual Retirement System
Bylaw About Individual Retirement Intermediaries and Brokers
Bylaw About The Establishment and Bylaw About Operations of The Retirement Companies
III. The Regulations of Capital Markets Board
Bylaw About The Establishment and Operation Procedures Of The Pension Funds
In Table -1, the process of the retirement system is tried to be summerized graphically.