What is Private Pension?
Private Pension System
(PPS) is a special kind of savings system complementary to the current state social security system with an intent to provide additional income to individuals during their retirement days. Based entirely on voluntary participation, this system is also supported by state contribution. The objective is to encourage citizens to regular savings to ensure a high life standard during their retirement period.
Any individual who have turned 18 years can participate in PPP and become entitled for retirement after turning age 56, provided that system membership shall be minimum ten years. Individuals not included in any type of social security system can also participate in PPS.
What is State contribution?
It is the amount paid by the Government to the participant's pension account, equal to 25% of the contribution amounts paid by that participant.
What is the amount of State contribution?
25% of the contribution amount paid for the participant is calculated as state contribution, limited to the annual total amount of minimum wage for the respective year.
Who can benefit from State contribution?
All participants who are Turkish citizens and who pay contribution shares under a private or group based private pension contract can receive State Contribution within the specified limits.
What is Interest-free Private Pension?
Private Pension System is a special pension system ensuring safe savings for financial welfare of individuals during their retirement period through directing their regular savings made throughout their active employment to long term investments. The savings obtained through such investment can be withdrawn as a lump sum payment or received as monthly retirement pension payments. Basic properties of PPS are listed as follows:
- Based on voluntary participation.
- Complementary to existing state social security system.
- Anyone with the capacity to exercise their civil rights can participate.
- Based on individual contribution pays and pension investment funds.
- State contribution is applicable for encouraging investment.
Amount of contribution shares, intermediary companies to pay these shares and pension investment funds to invest the savings depend on participants' preference. System participation is not mandatory and accordingly, participants can step out on their own decision. In other words, participants are free to leave the system at any time.
The significant point from the perspective of Islamic law within this system, which fundamentally ensures individuals to make savings for retirement purposes through private pension companies established and operating under the relevant regulations, is the content of pension investment funds.
Private pension funds based on participation accounts, gold, stock certificates compliant with participation banking, public and private sector lease certificates (sukuks) with declaration of conformity have been set up for individuals who are sensitive about interest. In addition to the foregoing, investments in foreign currencies, real estate and commodities through observing expenditure agreement rules would also be interest-free.
In Interest-free Private Pension System, investments are made into instruments approved by the advisory board, religiously approved to be traded, with a positive evaluation as to compliance with interest-free and participation banking principles.
Financial instruments included in Interest-free Private Pension funds are as follows:
- Participation accounts to be opened at participation banks
- Stock certificates fit for participation index
- gold and precious metals
- Interest-free mutual funds
- Interest-free borrowing instruments issued within Turkey or in foreign countries such lease certificates (sukuks), etc.
Katılım Emeklilik operates in compliance with interest-free private pension system principles.