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

What is IPS?

The Individual Pension System (“IPS” for short) is a private pension system that provides an income to maintain living standards during retirement through the long-term investment of the savings people make during their active careers. People participate in the system voluntarily to benefit from an income in addition to the pension income provided by the social security system.

The IPS aims to do the following:

  • Increase the level of wealth by providing an additional income through investment of individuals' pension savings,

  • Create a lasting source for the economy,

  • Boost employment, 

  • Contribute to economic development.

Entered into force pursuant to Individual Pension Savings and Investment System Law No. 4632, the IPS runs on the principle of the collection and investment of savings and then making a lump-sum payment or regular payments to the individual. This system does not offer the health or other services provided by the Social Security Institution. The IPS is a supplement and not an alternative to the compulsory social security system.

An amount that is equal to 30 percent of the contribution payments you have made is paid as a state contribution into your individual pension account. The state contribution paid to a participant cannot exceed 30 percent of the total gross minimum wage for that year. Contribution payments exceeding the aforementioned limit will be considered in the calculation of the State contribution as carryover contribution shares transferred to the company accounts on the first day of each year.

You can enter the IPS by acquiring a pension product (pension plan) from your choice of pension company.

The pension company provides information on any matters that may impact your decision to enter the system and then offers a pension plan suitable for your pension expectations, income level and age. You enter into a pension contract upon your acceptance of the offer, duly signing the documents, or confirming them via electronic communication tools. The pension company then may apply deductions based on the pension plan you purchased.

The contribution payments you make based on your pension plan are invested in pension mutual funds after any set deductions in your plan, if any. You can decide on the fund(s) to invest your savings in according to your risk and return choices. If you do not make a fund distribution choice, your accumulations are invested in a standard fund in accordance with the pension plan. Portfolio management specialists manage the fund portfolio. Istanbul Settlement and Custody Bank Inc. keeps the assets in your portfolio in a secure manner. You can keep track of your accumulations from the BES Mobile application provided by the Pension Monitoring Center.

The pension company makes deductions from the fund for charges and operations arising from fund expenses within legislative limits.

You can change your contribution amount, pension company, pension plan, or funds in the pension contract within legislative limits. You can stop contributing or re-start at any time.

In the circumstances determined by the Insurance and Individual Pension Regulation and Supervision Agency and without leaving the system, you can also receive payment from the amount in the State Contribution account up to 50 percent of the savings amount in your account and no more than 25 percent of the partially paid payment amount, excluding the amounts in the State Contribution account.

In order to retire, you must stay in the system for 10 years from the first date of entry into the system and have attained the age of 56. After meeting these conditions, you may stay in the system and continue paying contributions to grow your savings even more.

Once you get the right to retire and use the right;

  • You can request a lump-sum payment of some or all of your accumulations in the individual pension and state contribution accounts.

  • You can also choose to stay in the IPS and receive your accumulations in part from the pension company according to the reimbursement plan you decide.

  • You can earn regular income by purchasing an annuity with some or all of your accumulations.

You can leave the system anytime by withdrawing your accumulations. If you leave the system, the pension company deducts income (withholding) tax on the payments due to you based on your accumulations. The withholding tax deduction rate is as follows:

  • 5 percent for vested participants for retirement (got the right to retire) in the system and for participants who leave the system due to inevitable reasons such as death, disability or liquidation,

  • 10 percent for participants who leave the system before becoming vested for retirement despite having stayed in the system for 10 years,

  • 15 percent for participants who leave the system after having stayed for fewer than 10 years.

The IPS is audited, overseen and supervised by the Insurance and Private Pension Regulation and Supervision Agency, the Capital Markets Board of Turkey, the Pension Monitoring Center, the Istanbul Settlement and Custody Bank and independent audit companies to ensure transparency and security. Please click here for more information.

Individuals can enter into the system on their own; alternatively, employers can enter the employees into the system by drawing up a group pension contract. The employers who draw up a group pension contract can directly write off the contribution they pay on behalf of their employees (provided that the write-off does not exceed 15 percent of the earnings in the payment month, or the annual minimum wage amount). Please click here for more information.