Voluntary Participation (IPS) Auto Enrollment System (AES) Funds Legislation Data Center

AES – IPS Comparison

IPS AES
Participation in the system Voluntary Compulsory
Condition for retirement Remain in the system for 10 years as of the system entry date and turn 56 Remain in the system for 10 years as of the system entry date and turn 56
Target audience Anyone with the capacity to act (1) Employees under 45 years of age

Participation in the system by foreign nationals

Allowed (2)

Not Allowed

The party determining the pension company

  • Participant in individual or group individual contract

  • Employer in noncontributory group contract (certificate delivery to participants)

Employer (certificate delivery to employees)

Documents to sign/approve during contract preparation phase

  • Participant pension contract proposal and entrance information forms for individual or group individual contracts

  • Employer/employer representative pension contract proposal and entrance information forms for noncontributory group contracts

Automatic participation pension contract by employer/employer representative

Right of withdrawal in the grace period

Yes (Right of withdrawal within two months after pension contract proposal form signing/approval)

Yes (Right of withdrawal within two months after pension company informs employee about participation in the pension plan)

Company's obligation to bear the possible loss in the accumulations during the right of withdrawal period

No

Yes

State contribution amount

25 percent of the paid contributions (3)

25 percent of the paid contributions

  • + One-time 1,000 TL, in case of remaining in the system after the right of withdrawal period

  • + 5% percent of the accumulations, in case of opting to receive the right of pension as a 10-year annuity

State contribution upper limit

8,829 TL for 2020 (4)

8,829 TL for 2020 (4)

State contribution payment method

Cash payment into account

Showing in personal account records for each commitment until vesting, cash payment of the vested amount into account based on the vesting rate

Conditions for vesting for state contribution

Of the amounts in the state contribution account;

  • 15% by staying in the system for at least 3 years,

  • 35% by staying in the system for at least 6 years,

  • 60% by staying in the system for at least 10 years,

  • 100% in the case of death or disability.

Of the amounts in the state contribution account;

  • 15% by staying in the system for at least 3 years,

  • 35% by staying in the system for at least 6 years,

  • 60% by staying in the system for at least 10 years,

  • 100% in the case of death or disability.

Investment of State Contributions

Investment in the state contribution funds determined by the Ministry

Providing returns, based on the CPI change (5), from the state contribution amounts committed at the start of each calendar year; investing in the state contribution funds the amounts paid in cash according to the following years’ vesting rates.

Contribution amount

Any amount over the minimum amount stated in the plan

3% of the premium-based earnings(6)

Additional contribution payment possible anytime

Yes

No

Contribution that can be made by the employer on behalf of the employee

Contribution paid through noncontributory group contracts

No

Suspension of contribution payments possible anytime

Yes

Yes

Possible deductions by the pension company: Entrance fee

Possible

No

Possible deductions by the pension company: Administrative expenses fee

Possible

No

Possible deductions by the pension company: Fund expense fee total

Yes (minimum 1.09%; maximum 2.28% of the annual fund asset value)

Yes (maximum 1.09% of of the fund asset value)

The party that decides the pension plan change

  • Participant in individual or group individual contract

  • Employer in noncontributory group contract

Employer (7)

The party that uses the right for pension company change

  • Participant in individual or group individual contract

  • Employer in noncontributory group contract

Employer

The party that decides the funds to invest the accumulations in

Participant

Employee (8)

The annual rights for fund distribution change

6 times a year

Maximum 6 changes per year in the funds that can be selected based on the time that the certificate remained in the system

  • Throughout the withdrawal period- initial fund

  • After the withdrawal period- initial fund, standard, other funds

Income tax (withholding tax) rate to apply on earnings in case of leaving the system

  • 15% by staying in the system for less than 10 years,

  • 10% by leaving the system before becoming vested for retirement despite of staying in the system for 10 years,

  • 5% by leaving due to retirement, death or disability.

  • 15% by staying in the system for less than 10 years,

  • 10% by leaving the system before becoming vested for retirement despite of staying in the system for 10 years,

  • 5% by leaving due to retirement, death or disability.

Payment options available to retired individuals

  • Lump-sum payment (One-off payment of the entire accumulations)

  • Programmed withdrawal (Payment of all or a part of the accumulations by a certain schedule)

  • Annuity (Payment of all or a part of the accumulations as a salary within the scope of the annuity contract)

  • Lump-sum payment (One-off payment of the entire accumulations)

  • Programmed withdrawal (Payment of all or a part of the accumulations by a certain schedule)

  • Annuity (Payment of all or a part of the accumulations as a salary within the scope of the annuity contract)

Right to leave the system

Yes (Anytime)

Yes (Anytime)

Timing of changing the pension company

The pension company may be changed anytime after two years of the initial contract effective date or one year after the effective date of the contract that was drawn up through transfer.

The pension company may be changed anytime after two years of the initial contract effective date or one year after the effective date of the contract that was drawn up through transfer.

Fund types offered

  • Equity Fund

  • Bonds and Bills Fund

  • Participation Fund

  • Composite Fund

  • Money Market Fund

  • Precious Metals Fund

  • Index Fund

  • Fund Basket Fund

  • Variable Fund

  • Standard Fund

  • Life-Cycle/Target Fund

  • Initial Fund

  • Standard Fund

  • Other Funds

    • Conservative/Cautious

    • Balanced

    • Daring/Dynamic/Growth

    • Aggressive


(1) Everyone can participate in the program regardless of the employment type or tax liability.
(2) Contribution payments of Turkish citizen- or Blue Card-holder participants are included in the state contribution calculation.
(3) The maximum amount of the state contribution you can receive is 25% of the gross minimum wage for the relevant year.
(4) Annual state contribution lower limit is set separately for IPS and AES.
(5) Pension companies do the valuation by taking into consideration the CPI rate difference between the calendar year and the month when the promised state contribution payment is calculated. No valuation is done for the additional state contribution of 1,000 Turkish lira.
(6) The employee can increase the legal deduction rate (3 percent) by informing the employer, or decrease the amount, provided that the rate does not go below the deduction rate set forth by the Law.
(7) In the event of employee's change of workplace or change of interest or no-interest containing fund changes, the plan change shall be considered to have been made by the employee.
(8) The employer can make the selection, if the right is not exercised.