Auto Enrolment system which will be effective as of January 1st, 2017 aim to provide employees with additional income apart from the pension income provided by the social security system and to increase the number of savings in our country. This system, which aims to increase the number of participants in the individual pension system, to cover all the masses of savings and to spread to the banks, is applied in many countries such as USA, UK, New Zealand, Italy.
| Private sector companies with over 1000 employees | January 1, 2017 |
| Private sector companies and public entities with 250-999 employees (general and special budgeted administrations) | April 1, 2017 |
| Private sector companies with 100-249 employees | 1 July 2017 |
| Private sector companies, Local administrations and SEEs (State Economic Enterprises) with 50-99 employees | January 1, 2018 |
| Private sector companies with 10-49 employees | 1 July 2018 |
| Private sector companies with 5-9 employees | January 1, 2019 |
Every employer involved in the Auto Enrolment system is obliged to contract with a pension company on behalf of its employees and to include employees who meet the criteria in the legislation.
To allow their employees to be included in the system, the employer shall report all necessary information pursuant to law and sub-regulations to the pension company and forward this monthly data to the pension company. The employer shall deduct from the salaries of the employees a minimum 3% of premium based earnings or monthly pension deduction based pay and this amount shall be transferred to the pension company no later than the following business day after the date of the employee's salary paid.
The business day following the date on which the first contribution payment deducted from the employee pay transferred to the pension company's account in cash, it is reported to the employee by the pension company, which has involved them in a pension plan under an automated Enrolment. The employee has right of withdrawal from the contract within 2 months following the date of this notification. In this case, contributions paid by the employee until that date, if any, will be returned to the employee's investment income. If the employee desires to leave the system after the end of the withdrawal term, the leaving rules in the individual pension system will be effective.
It is not possible for an employee who performs withdrawal / leaving to be included in the system again in line with his / her request.
However, employees who continue to work in the same workplace and meet the conditions will be included in the system again under the procedures determined by the Undersecretariat.
Employee contribution shall be the amount corresponding to minimum 3% of the premium based earnings or monthly pension deduction based pay. Employees should inform their employer if they wish to pay higher than this amount.
Employee can not pay additional contribution other than deduction from his/her pay.
The Initial State Subsidy is calculated Autoally in the month following the end of the withdrawal term, for only once during the entry into the system as part of Auto Enrolment. The initial state subsidy of an employee who has more than one contract with withdrawal term expired is calculated by taking into account the weight of contributions paid per contract in the month that withdrawal term ended, and is shared among the employee's contracts. In the event of a cancellation any of these contracts, promised initial state subsidy for this contract is distributed to the remaining contracts. If there is more than one contract to be distributed, the weight of the contributions paid per contract in the month in which the initial distribution and the end of the withdrawal term will be basis.
If the employee who has left the system cancelling all contracts is included in the system again, the initial state subsidy will not be recalculated.
The state subsidy upper limit for contracts under the scope of Auto Enrolment will be calculated separately from the state subsidy limit of the IPS contracts.
State subsidy incentive at 25% and 1.000 TL initial state subsidy incentive have same vesting period which is announced on the table below. (Same as the periods and rates in the IPS system).
| The number of completed year in the system | State subsidy vesting rate |
|---|---|
| Up to 3 years | 0% |
| from 3 years to 6 years | 15% |
| from 6 years to 10 years | 35% |
| 10 years and more | 60% |
| Retirement, death, disability | 100% |
Within the scope of Auto Enrolment, employees do not pay entrance fee, in case of leaving, they do not pay any deferred fee or payment. As long as they are participated in the system, no deduction is made by pension companies other than the Fund Management Fee (FMF) over the employees' savings in the pension account. The maximum annual fund operation expenses fee rate is applied as 0.85% for all funds offered to employees who are included in the individual pension system through their employers under Auto Enrolment. In accordance with the legislation, the Fund Total Expenditure Fee, including the FMF, in pension mutual funds offered under Auto Enrolment can not exceed maximum 1.09% per year.
In the event that the employees do not make preference of interest or interest-free fund, that of the fund declared by the employer shall be valid. In this context, the contributions are firstly directed to "Initial Funds" stated in the plan in accordance with the preference made. Contributions will increase in value under the "Initial Fund" until 01.07.2016, after which the risk profile survey is presented to the employees who prefer to affiliated from this fund, without being binding. Contributions and saving are directed to investment through funds / fund groups at different risk profiles presented in the preference of participant. If the customer does not make any changes, it will be automatically transferred to the "Standard Fund" from the "Initial Fund" at the end of the first year. A risk profile survey, without being binding, is presented to the participants, who have decided to quit the standard fund.
Employees can change their fund distributions 6 times in a year.
Employers may be able to enter into an agreement with a pension company approved by the Undersecretary of the Treasury on behalf of their employees.
The employee will have an Auto Enrolment agreement with each employer who is included in Auto Enrolment.
In the case of separation from the employee's work, he will do all his work directly with the pension company.
An employee, who was included in the private pension system and was still in the system as of the date change of workplace, if in his new work place there is a pension plan offered to the employees his savings in the individual pension account and government contributions, if any, shall be transferred to the plan of the new workplace upon his request and the term to entitlement to pension and the term to entitlement to government contribution shall be protected exactly in the plan of the new workplace.
When the employee changes jobs, if the new employer does not have a pension plan for Auto Enrolment or if the working relationship of the person has ended, he/she can continue the existing pension plan. In this case, he/she makes the payments himself/herself (through credit card, bank account etc.) to the pension company with which Auto Enrolment contract is executed.
In case the employee does not demand to continue to pay the contribution, he/she can stop the payment for maximum 3 months or proceed a disaffiliation process. The employee is obliged to notify to the pension company of his request to discontinue to pay contribution, of workplace change/leaving work until the end of the following month in written or via any types of electronic communication.
If the employee changes the workplace and there is no pension plan offered at the new workplace, or if the work relationship of the person ends, under the pension plan he/she has been included in the previous workplace, it is possible to continue to stay in the system paying at least 3% of the monthly minimum gross pay to be applied in the first six months of the relevant calendar year. Notifications about the issues such as continuing to pay the contribution until the end of the month following the date on which he/she left or that payment interruption or withdrawal from the contract must be communicated in writing or through secure electronic communications means and if the request is not transmitted until the end of the month following the departure date, the departure procedures will be executed without contract will be made in writing or via secure electronic communication means.
Yes, all employees who meet the conditions for the Auto Enrolment system will be included in the system.
No, new contract will be initiated with Auto Enrolment. Existing private pension contracts will continue separately.
The pension and state subsidy based periods as well as other rights and obligations under Auto Enrolment can not be consolidated with the private pension contracts under Auto Enrolment.
Employees who have at least 10 years in the Auto Enrolment system and who complete 56 years of age are entitled to get a pension.
Employees who leave the system using the right of pension benefit from the following incentives:
Employees can recieve their savings in 3 ways:
*Employees using this preference can benefit from additional state subsidy incentives up to 5% of their savings.
All questions and answers stated in this text are drafted considering the Regulation on Individual Pension for amendment of The Code of Private Pension Savings and Investment System no 6740 which has amended the Code of Private Pension Savings and Investment System no 4632 and Circular Letter and relevant notices on Private Pension System. In the legislative amendments related to Private Pension System or new sub-legislative arrangements to be issued may set forth different procedures from those in this text.
Auto Enrolment is the practice of involving employees in the pension plan automatically through their employers. The Auto Enrolment system, which will be gradually transferred considering the size of the establishment, was published in the Official Newspaper dated 25.08.2016 and no. 29812 with the Code of Private Pension Savings and Investment System no 6740 which has amended the Code of Private Pension Savings and Investment System no 4632 and entered into force on 01.01.2017.
| Private sector companies with over 1000 employees | January 1, 2017 |
| Private sector companies and public entities with 250-999 employees (general and special budgeted administrations) | April 1, 2017 |
| Private sector companies with 100-249 employees | 1 July 2017 |
| Private sector companies, Local administrations and SEEs (State Economic Enterprises) with 50-99 employees | January 1, 2018 |
| Private sector companies with 10-49 employees | 1 July 2018 |
| Private sector companies with 5-9 employees | January 1, 2019 |
| Date | 01.04.2017 | 01.07.2017 | Scope Date |
|---|---|---|---|
| Employee | 200 | 240 | 01.07.2017 |
| Employee | 200 | 260* | 01.01.2018 |
* According to the latest SSI record in the period of 02.04.2017-30.06.2017, they will not be included in the coverage even after reaching the number of employees (250-999).
Regardless of whether or not employees are qualified for the Auto Enrolment , the number of all employees attached to the relevant employer is taken into account. (Number of employees under 45 years of age or older, domestic / foreign / working abroad, branches and / or multiple workplaces without discrimination.)
As part of Auto Enrolment, it is expected that the number of employees based on the tax ID card will be considered as separate legal entity for each employer.
If an employee works in more than one workplace depending on the same employer under a single service contract and is paid a single salary, the employee is included in a single pension plan by the employer.
If an employee works in more than one workplace depending on the same employer, has separate service contract with the employer for each workplace and payment is made separately for each contract, the employee is included separately in the relevant pension plan presented to the employees for each workplace by the employer.
If an employee works in more than one workplace depending on the same employer under a single service contract and is paid separately for each workplace, employee is included separately in the relevant pension plan presented to the employees for each workplace by the employer.
For employers with more than one workplace, the sum of the employees in all the workplaces is taken into consideration and Auto Enrolment is included under one roof.
a. Choosing a pension company
Every employer within the scope of Article 12 of the Law No. 5510 requiring the inclusion of the Auto Enrolment system is obliged to make a contract with a pension company on behalf of its employees.Every employer involved in the Auto Enrolment system is obliged to contract with a pension company on behalf of its employees and to include employees who meet the criteria in the legislation. The choice of company should be favored considering the quality of service and the advantages provided to employees.
b. Choosing the funds
during the entry to the system, the employer is informed by employee's funding preference with interest / interest-free and makes such choice on employee's account who have not preferred any. It may also be agreed that the employee's fund preferences will be communicated directly to the pension company under the contract between employer and the company.
c. Paying Contribution
The employer is obliged to deduct from the salaries of the employees a minimum 3% of premium based earnings or monthly pension deduction based pay and to trandfer this amount to the pension company no later than the first business day after the date of the employee's salary paid.
Moreover, to allow their employees to be included in the system, the employer shall report all necessary information about law and sub-regulations to the pension company and forward this data to the pension company monthly.
a. If the employer does not comply with these obligations and the legislation to be enforced in the scope of Auto Enrolment, the administrative penalty of 100 TL shall be applied by the Ministry of Labor and Social Security for each violation.
b. The employer is responsible for the employee's financial loss in the savings if the contribution is incomplete, late transfer or transfer to the pension company.
A contract detailing the obligations of the parties between the employer and the pension company shall be signed. The minimum content of the contracts has been provided by the circular letter no 2016/39 dated 30.12.2016 and issued by Undersecretariat of Treasury.
Employers will not receive any forms or signatures from their employees.
No, they can not.
Employers can not pay an additional contribution on behalf of their employees. On the other hand, the employee may have contribution payment under employer group pension contract (EGPC).
No. The employer who wants to pay in this way has to be included in the scope of EGPC. Furthermore, the employer is obliged to include the employee in the Auto Enrolment system in any case.
Employers may change their pension company within the framework of the principles determined by the Undersecretariat.
The employee will have an Auto Enrolment agreement with each employer who is included in Auto Enrolment.
In the event that the employees do not make preference of interest or interest-free fund, that of the fund declared by the employer shall be valid. In this context, the contributions are firstly directed to "Initial Funds" stated in the plan in accordance with the preference made. Contributions will increase in value under the "Initial Fund" until 01.07.2016, after which the risk profile survey is presented to the employees who prefer to affiliated from this fund, without being binding. Contributions and saving are directed to investment through funds / fund groups at different risk profiles presented in the preference of participant. If the customer does not make any changes, it will be automatically transferred to the "Standard Fund" from the "Initial Fund" at the end of the first year. A risk profile survey, without being binding, is presented to the participants, who have decided to quit the standard fund.
Employees can change their fund distributions 6 times in a year.
Yes, he/she will.
It will not change the amount of contribution payable as long as the premium based income and retirement deduction are not affected.
Yes, they may.
Employee can not pay additional contribution other than deduction from his/her pay.
They will be calculated with reference to premium based income and pension fund.
If the employee wishes to continue the relevant pension plan, he/she has right for saving related to the contract.
In the case of separation from the employee's work, he will do all his work directly with the pension company.
An employee, who was included in the private pension system and was still in the system as of the date change of workplace, if in his new work place there is a pension plan offered to the employees his savings in the private pension account and government contributions, if any, shall be transferred to the plan of the new workplace and the term to entitlement to pension and the term to entitlement to government contribution shall be protected exactly in the plan of the new workplace.
When the employee changes jobs, if the new employer does not have a pension plan for Auto Enrolment or if the working relationship of the person has ended, he/she can continue the existing pension plan. In this case, he/she makes the payments himself/herself (through credit card, bank account etc.) to the pension company with which Auto Enrolment contract is executed.
In case the employee does not demand to continue to pay the contribution, he/she can stop the payment for maximum 3 months or proceed a disaffiliation process. The employee is obliged to notify to the company of his request to discontinue to pay contribution, of workplace change/leaving work until the end of the following month in written or via any types of electronic communication.
If the employee changes the workplace and there is no pension plan offered at the new workplace, or if the work relationship of the person ends, under the pension plan he/she has been included in the previous workplace, it is possible to continue to stay in the system paying at least 3% of the monthly minimum gross pay to be applied in the first six months of the relevant calendar year. Notifications about the issues such as continuing to pay the contribution until the end of the month following the date on which he/she left or that payment interruption or withdrawal from the contract must be communicated in writing or through secure electronic communications means and if the request is not transmitted until the end of the month following the departure date, the departure procedures will be executed without contract will be made in writing or via secure electronic communication means.
Yes, all employees who meet the conditions for the Auto Enrolment system will be included in the system.
No, new contract will be initiated with Auto Enrolment. Existing private pension contracts will continue separately.
Employee contribution is a priviliged recievable qualified for worker's recievable regarding proceeding with levy and bankruptcy under Enforcement and Bankruptcy Code no 2004 dated 9/6/1932 for which the employer is a party. Employers are inspected by the Ministry of Labor and Social Security in terms of their obligations under Auto Enrolment application.
Within the scope of Auto Enrolment , employees do not pay entrance fee, in case of leaving, they do not pay any deferred fee or payment. As long as they are participated in the system, no deduction is made by pension companies other than the Fund Management Fee (FMF) over the employees' savings in the pension account. The maximum annual fund management fee rate is applied as 0.85% for all funds offered to employees who are included in the Private annuity system through their employers under Auto Enrolment . In accordance with the legislation, the Fund Total Expenditure Deduction (FTED), including the FMF, in pension mutual funds offered under Auto Enrolment can not exceed maximum 1.09% per year.
The state subsidy upper limit for contracts under the scope of Auto Enrolment s will be calculated separately from the state subsidy limit of the private pension contracts.
a. State subsidy paid 25% of employee contribution
b. If they prefer to stay in the system at the end of the 2 month withdrawal term, the initial state subsidy at amount of 1000 TL
c. Supplemental state subsidy up to 5% of the saving od the employees who prefer to recieve their savings in the retirement period as income insurance
The Initial State Subsidy is calculated automatically in the month following the end of the withdrawal term, for only once during the entry into the system as part of Auto Enrolment. The initial state subsidy of an employee who has more than one contract with withdrawal term expired is calculated by taking into account the weight of contributions paid per contract in the month that withdrawal term ended, and is shared among the employee's contracts. In the event of a cancellation any of these contracts, promised initial state subsidy for this contract is distributed to the remaining contracts. If there is more than one contract to be distributed, the weight of the contributions paid per contract in the month in which the initial distribution and the end of the withdrawal term will be basis.
If the employee who has left the system cancelling all contracts is included in the system again, the initial state subsidy will not be recalculated.
State subsidy incentive at 25% and 1.000 TL initial state subsidy incentive have same vesting period which is announced on the table below.
| The number of completed year in the system | State subsidy vesting rate |
|---|---|
| Up to 3 years | 0% |
| from 3 years to 6 years | 15% |
| from 6 years to 10 years | 35% |
| 10 years and more - (Pre-pension) | 60% |
| Pension Period, death, disability | 100% |
The pension and state subsidy based periods as well as other rights and obligations under Auto Enrolment can not be consolidated with the IPS contracts under Auto Enrolment.
Employees who have at least 10 years in the Auto Enrolment system and who complete 56 years of age are entitled to get a pension.
Employees who leave the system using the right of pension benefit from the following incentives:
a. State subsidy paid regularly at rate of 25%
b. 1,000 TL state subsidy during the entrance to the system
c. In case of using the pension right, supplemental state subsidy with an amount of 5% of the saving given to the employee who prefers to have the savings in his/her pension account under the annual income insurance contract for at least ten years
Employees can recieve their savings in 3 ways:
a. Severance Pay
b. Programmed Payment Return: They will take in the form of a pension, which will be determined by themselves, and their payment will continue until sum of money ends.
c. Annual Revenue Insurance*: They take it in the form of a lifetime pension.
*Employees using this preference can benefit from additional state subsidy incentives up to 5% of their savings.
It is not possible for an employee who performs withdrawal / leaving to be included in the system again in line with his / her request.
However, employees who continue to work in the same workplace and meet the conditions will be included in the automatic system under the procedures determined by the Undersecretariat.
All questions and answers stated in this text are drafted considering the Regulation on Private Annuity for amendment of The Code of Private Pension Savings and Investment System no 6740 which has amended the Code of Private Pension Savings and Investment System no 4632 and Circular Letter and relevant notices on Private Pension System. In the legislative amendments related to Private Pension System or new sub-legislative arrangements to be issued may set forth different procedures from those in this text.
