Turkey implements new pension parameters
TURKEY - The Turkish government says it will implement new pension parameters to help put its medium-term finances on a secure footing.
"To put turkey's medium-term public finances on a secure footing, we will begin implementing the new pension parameters, including the pension indexation formula, by January 1 2007," officials stated in a letter to the International Monetary Fund.
The three social security organisations - Bag-Kur, SSK and Emekli Sandigi - are being unified, with staff and databases being consolidated, said economic affairs minister Ali Babacan and Central Bank of Turkey Governor Durmus Yilmaz.
Meanwhile, with two reform bills the Turkish government is steering the country's pension system on course with the European directive on occupational pension funds, IORP.
"One of the main purposes of the bill is to set up the legal framework for the establishment of occupation pension plans based on the sound supervisory structure of the private pension system that started in October 2003," a member of the Turkish Treasury told IPE during the OECD/IOPS (International Organisation of Pension Supervisors) conference on private pensions in Istanbul.
"This will ensure that an occupational pension scheme, to which every Turkish employer (on a voluntary basis) will have access, will be available. This is a big step towards the construction of a sound occupational pension system as suggested by the IORP directive."
According to the source the bill is currently in its last stages before being made into law with the final approval being awaited for mid-January or early February.
Another proposal currently being reviewed by parliament deals with one of the few criticisms of the Turkish second pillar that had been voiced during the conference: investment restrictions for pension funds.
"In Turkey relaxation of investment limits and promotion of international asset diversification is very important because if nearly everything is invested in government bonds than this is not a funded system", Dimitri Vittas, consultant with the World Bank, said at the conference.
Should the proposal be accepted both the 15% cap on foreign securities investment and the 30% floor on government bonds would be removed. "This will be a critical step towards ensuring conformity with the investment principles designated in the IORP directive", the Treasury source told IPE.
Since its establishment the number of participants in the private pension system grew from just under 17,000 to more than one million. The capital accumulated in the pension funds increased from $29.5m (€22.3m) in 2003 to $1.8bn.