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No Exit for 10 Years: Turkey’s New Pension Trap?

Wages in Turkey

Turkey is preparing for one of its most significant retirement reforms in decades as the Complementary Pension System (TES) nears finalization. Expected to launch later this year, TES will replace and merge with the Automatic Participation System (OKS), aiming to boost long-term savings while reshaping how millions of employees prepare for retirement.

Unlike the current voluntary Private Pension System (BES), the TES framework will mandate automatic participation for all employees, ensuring that contributions are collected consistently across the workforce.

Contributions: Employee, Employer, and State

The TES model is designed around a tripartite contribution structure:

  • 3% from employees’ net salaries (mandatory monthly deduction).

  • 2% from employers (direct contribution on behalf of employees).

  • 1% from the state (government support to encourage participation).

In total, 6% of an employee’s monthly salary will flow into the TES savings pool. Funds will be managed by the state, but participants will have the option to select which investment instruments their premiums are allocated to.

This flexibility is intended to reward employees who choose higher-yield investments, allowing their savings to grow faster.

Access to Funds: Strict Rules with Limited Exceptions

TES introduces tighter restrictions compared to BES. While individuals in BES can exit the system more freely, TES participants will face a 10-year minimum participation requirement before gaining access to their accumulated savings.

Early withdrawals will only be permitted under exceptional circumstances, including:

  • Natural disasters

  • Education expenses

  • Purchasing a home

  • Military service

In these cases, employees will be allowed to withdraw a portion of their accumulated premiums, ensuring that the bulk of savings remain intact for retirement.

No Changes to Severance Pay

One of the most debated points in previous reform proposals—whether TES would absorb or replace severance pay (kıdem tazminatı)—has now been clarified.

According to draft texts cited by Habertürk’s Rahim Ak, severance pay will remain completely separate from TES. The current severance pay framework will continue unchanged, alongside the new pension system.

This decision is expected to reassure employees and unions, many of whom had expressed concerns that TES could weaken existing severance entitlements.

How TES Differs from Current Systems

TES stands apart from other savings models in Turkey:

  • BES (Voluntary Pension System): Voluntary, flexible exit options, state matching contribution (currently 30%).

  • OKS (Automatic Participation): Limited coverage, lower participation due to opt-out rates, will now be merged into TES.

  • TES (Complementary Pension System): Mandatory for all employees, higher combined contributions (6%), strict 10-year participation rule, employer obligations, and defined state share.

By combining OKS with TES, the government aims to reduce opt-outs and ensure that every employee, regardless of sector or salary level, is actively building long-term savings.

Policy Goals and Economic Context

Officials argue that TES will strengthen Turkey’s domestic savings base, which in turn can help reduce reliance on foreign capital and support financial stability. By locking in contributions for at least 10 years, TES also creates a long-term investment pool that can be channeled into productive sectors.

Experts highlight that such systems, if managed transparently, not only improve individual retirement security but also boost national investment capacity.

However, critics warn of two potential challenges:

  1. Reduced disposable income: With 3% deductions from net salaries, employees may feel short-term pressure on household budgets.

  2. Trust in state management: Long-term participation hinges on whether workers believe their savings will be managed effectively and fairly.

Voices from the Field

While official communication emphasizes the benefits of TES, labor representatives stress that success will depend on clear governance rules and transparent fund management.

Financial analysts add that the system must ensure competitive returns; otherwise, compulsory savings may erode purchasing power in real terms, especially under high inflation conditions.

Timeline: When TES Will Start

According to preliminary plans, TES is expected to launch in the second quarter of 2025, with gradual integration of OKS participants into the new framework. Draft legislation has already reached its final stage, and the government is preparing to present it to parliament.

If enacted on schedule, millions of employees will see deductions from their salaries beginning in the second half of 2025.

A New Era for Retirement Savings

The Complementary Pension System (TES) represents a transformational shift in how Turkey approaches retirement planning. With mandatory contributions, strict access rules, and employer participation, the model aims to strengthen retirement security while building a deeper national savings pool.

For employees, TES means less take-home pay today but potentially greater financial security tomorrow. Whether it delivers on this promise will depend on transparent fund management, fair returns, and sustained trust between citizens and the state.

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