What Is the Private Pension System(PPS)?
The Private Pension System (PPS) is a private saving and investment system aiming to provide an additional income to the individuals during their retirement years. It is not an alternative, but a complementary facility, to the existing public social security system. Everybody above 18 years old who has legal capacity can participate in the system, without the requirement to be or not to be a member of any social security institution. It is a system based on voluntary participation. The objective of the system is to encourage the individuals to save money throughout their working life to meet their cash need during the retirement years, to encourage them to save money in the long run, so that they can maintain the level of income they have throughout their working life during the retirement years.
How Much Contribution Should Be Paid for the Private Pension Plan?
You can freely fix the amount of contribution so long as it is not less than the minimum contribution specified on the plan of your choice, by taking into account your current income and your expectations during the retirement years. You can pay the contribution monthly, quarterly, semi-yearly and yearly. You can fix the contribution at 5% to 15% of your current income, pay your contributions regularly, pay extra contributions from time to time, and track the proceeds from your invested funds, so that you can have a greater saving at the time of your retirement.
How Are Your Savings Invested in the Private Pension System?
Your savings are invested in the pension investment funds. These funds are created by the pension companies and managed by specialist portfolio management companies. So, you can benefit from some tax advantages which lack in any other investment funds in which you can invest your periodic savings, and from the institutional services of the fund management companies.
When Does the Private Pension Contract Come into Effect?
Your pension contract comes into effect at the date when your first contribution is received in the account of the company. You have the right of withdrawal within 2 months following the date of signing of the proposal form or the acceptance of the proposal. In this case, the contributions you have paid so far are repaid to you, together with the income thereon, if any, without making any deduction therefrom, except for the fund overall expenditure deduction, within 10 business days.
How Does the Control and Audit Mechanism Run in the Private Pension System?
In the Private Pension System, your savings are kept in an account opened with Takasbank [clearing bank], not in the account of the pension company.
For the auditing of the pension companies, various audit and surveillance mechanisms have been established. The pension companies are under continuous audit, surveillance and control of various authorities and institutions such as Under Secretariat of Treasury, the Capital Market Board, the Pension Surveillance Centre, Takasbank, and independent audit firms.
Group Pension Contracts
Group pension contracts can be executed as a group-linked personal contract or as an employer’s group pension contract.
The group-linked personal pension contract is a pension contract executed between the company and the participant as linked to a group pension plan.
The employer’s group pension contract is a pension contract executed between a sponsor and the company in connection with an employment relationship or on behalf of the participant, under which the contributions of the participant are paid by the sponsor.
The employers can account for the contributions they have paid on the name and account of their employees under the employer’s group pension contract as expense. The employers can deduct the contributions they have paid for their employees under the employer’s group pension contract as expense from the tax base, provided that the amount of contribution so deducted from the tax base does not exceed 15% of the monthly salary of the respective employee and the gross annual minimum wage. For the employer’s group pension contracts, if contributions are paid by the employer on the name and account of the employees, the time for the participant’s entitlement to receive the savings may not exceed 7 years from the date of enrolment in the group pension contract.