Automatic Enrollment is coming!
A new era has begun in BES on 01.01.2017. Employees under 45 years old who have been working and who have started working in the private or public sector are automatically included in the Private Pension System through their employees based on a calendar.
What is new in the Automatic Enrollment intended to encourage employees to make savings?
• A contribution of 3% of the employee’s earnings taken as a basis to premium
• An additional one-off government contribution of TL 1000 on top of the 25% government contribution
• Additional 5% government contribution when savings are transferred to a minimum 10-year annuity during retirement
WE HAVE THOUGHT ABOUT EVERYTHING FOR YOU
Vakif Pension is one of the most important subsidiaries of 100% locally-owned VakifBank. As a leading company with a 25 years of experience in the sector, it is an important heir to the Foundation (Vakif) Culture:
Vakif Pension manages a fund volume of over TL 4.7 billion in the Private Pension sector, serving more than 466 thousand participants. The interest-free funds total of Vakif Pension has reached TL 789.5 million as of January 11, 2017, making the company the leader of the market with a share of 20.68% among all the other Private Pension enrollment funds.
• Automatic BES Call Center – Support for Employees and HR professionals regarding everything about Automatic BES at 0 850 222 9 657
• Automatic BES Branch – Automatic BES Branch specifically designed for the companies to be included in the system with the Automatic Enrollment
• Additional Benefits Special for the Plan
• Mobile Branch – The first brand to offer Mobile Branch service in the sector Wearable Technology
• Private Online Branch
• Interactive SMS and IVR support for selection of funds
• Consultancy Support on the Spot
Questions and answers regarding automatic enrollment
1. Who are eligible for automatic enrollment?
According to Article 4 of the Law no. 5510 on Social Insurances and General Health Insurance, employees under 45 years old who have been working and who have started working in the private or public sector will be automatically included in the private pension system as of 01.01.2017 through their employers.
Law no. 4632 stipulates a gradual procedure when employees are being automatically included in the private pension system.
Accordingly, employees will be included automatically in the private pension system through their employers:
• as of 01.01.2017 if they are working in the private sector for an employer who employs 1000 or more employees,
• as of 01.04.2017 if they are working in the private sector for an employer who employs 250 – 999 employees and employees working in social security institutions and public administrations under central administration included in the lists scheduled to the Law no. 5018 on Public Finance Management and Control,
• as of 01.07.2017 if they are working in the private sector for an employer who employs 100 – 249 employees,
• as of 01.07.2018 if they are working in the private sector for an employer who employs 50 – 99 employees and employees working in local governments and government business enterprises,
• as of 01.07.2018 if they are working in the private sector for an employer who employs 10 – 49 employees, and
• as of 01.01.2019 if they are working in the private sector for an employer who employs 5 – 9 employees.
• When determining the number of employees, the total number of employees working in all businesses of employers will be taken into account for employers who have more than one business. Furthermore, the most recent Social Security Institution data as of the date of inclusion will also be taken into consideration when determining the number of employees.
2. What will be the minimum amount to be paid in the automatic BES ?
For any employee, the amount corresponding to 3% of the income that is basis to the premium or the salary that is basis to the pension deduction shall be deducted from the salary as contribution. The minimum basis that is defined as 3% may not be changed by employee or employer. For example, the contribution to be paid by the employees who earn a minimum wage of TL 1,647* will be TL 50 a month. Employees will be free to ask for a greater deduction from their salaries for the automatic enrollment.
Participants are responsible for notifying their employers about their demands for increasing and decreasing the amount of contribution before the salary of the relevant month is calculated. Any demands received after calculation of the salary shall be taken into consideration as of the next payment period.
*Calculation is based on gross minimum wage of 2016.
3. Will deductions be made from those who enter the system through automatic
No deductions will be made in the system except for Fund Management Fee (FIGK). The maximum annual rate of Fund Management Fee is 0.85% whereas the maximum annual rate of Fund Total Expense Fee (FTGK) is 1.09%.
4. Will there be a government contribution in the automatic enrollment system ?
The government will make three different contributions in the process:
• Subject to the same conditions with the existing private pension system, the government will contribute 25 percent in the contributions deducted from salaries of employees.
• In case the employee does not exercise his or her right of withdrawal, the initial government contribution of TL 1,000 will be calculated, for one time only when entering the system, in the next accounting period from the month when the right of withdrawal has expired.
• In the event of exercising the right of retirement, the employees who prefer receiving their savings in the private pension account under the annual annuity contract of minimum 10-year duration, the government will pay an additional contribution of 5% of their savings.
* In the event the single-premium annual annuity is terminated before ten years, except for compulsory reasons such as death, disability or liquidation; twice the amount of the additional government contribution paid will be returned and recorded as revenue in the government budget in accordance with the procedures for undeserved government contribution. Furthermore, the amount of undeserved government contribution to be returned is limited to the negotiated amount to be collected by the employee from the relevant pension company in exchange for terminating the annual annuity before 10 years.
5. Is it possible to make additional contribution payments in the Automatic Enrollment ?
No contribution payment will be made except for the deduction to be made from the salary of an employee.
6. Is it possible to make additional contribution payments in the Automatic Enrollment?
Hayır, Otomatik Katılımda sadece çalışanlar katkı payı ödemesi yapacaktır.
7. What are the minimum and maximum amounts to be deducted from the salary of an employee?
Contribution is transferred by the employer through a bank to a single account to be designated by the pension company no later than the working day after the date the salary is paid. The contributions of the expense divisions conducting their monthly transactions over the information systems of the Ministry of Finance (General Directorate of Accounting) will be paid to the same account of the company.
8. What happens when the employer fails to transfer the amount deducted from
the salary to the pension company?
According to the operation of the system, one of the most important responsibilities to be fulfilled by employers is to deduct from the employee’s salary the contributions to be paid by the employee to the system and transfer the same to the pension company. If an employer fails to transfer the contribution to the pension company on time or transfers it late, the employer shall be responsible for any monetary loss incurred by the employee in his or her savings.
9. Does an employee have the right to temporarily discontinue paying contributions ?
An employee may ask for temporarily discontinuing the payment of contributions. Such right may be exercised for a maximum period of 3 months starting from the date of request. It is possible to request for discontinuance once again prior or subsequent to expiration of such period. Upon filing of the request for discontinuance by the employee, no contribution may be deducted from the salary paid to the employee. The employee submits his or her request for discontinuance no later than three working days before the date of salary payment. Requests filed after such date shall be taken into consideration only as of the salary payment of the next month. If the employee requests for temporarily discontinuing the payment, additional management fee may not be deducted from his or her savings. Upon expiration of the period of discontinuance, the employer continues making contribution deductions from the salary of such employee. Only the employee may exercise the right to temporarily discontinue payments. Such right may not be transferred to the employer.
10. Does an employee have the right to leave the system?
An employee shall have the right to request for withdrawing from the system within 2 months from the date when the employee is notified by the company that he or she is included in the pension plan. Participants will be free to leave the system at any time following the period of withdrawal. The contributions paid by the employee plus the investment proceeds in his or her account, if any, shall be returned to the said employee within ten working days from receipt of the withdrawal notification by the pension company.
11. When will an employee become entitled to retirement from the Automatic Enrollment?
In case of leaving the automatic enrollment system early, will it be possible to receive the government contribution in full?
The conditions defined for the existing BES applies to the Automatic Enrollment system, as well. Employees who have been registered with the system for 10 years and have turned 56 will be entitled to retirement. The existing government contribution entitlement periods apply to the new system, as well. Entitlement periods for the government contribution are as follows:
• No entitlement if the employee leaves the system within the first three years,
• 15% at the end of year three,
• 35% at the end of year six,
• 60% at the end of year ten,
• Entire amount upon entitlement to retirement.
An employee who has more than one Automatic Enrollment contract, such employee shall have the right to merge all of them and exercise the right to retirement when he or she becomes entitled to retirement according to any one of those contracts.
In the event the employee requests for leaving the system by exercising the right of retirement, it is possible to merge the accounts in his or her contracts. In the event the participant has more than one valid contract drawn up under the automatic enrollment with the same or a different company, the earliest date of enrollment in force will be taken into consideration from among all his or her contracts in force.
Employees who have left the system may be automatically reenrolled in the system every 2 years. The Undersecretariat is authorized to decrease such period up to 1 year or increase it up to 3 years.
12. What happens when an employee changes job?
The savings in the private pension account and the government contributions paid, if any, of an employee who has been included in the private pension system and is registered with the system as of the date of changing job shall be transferred to the plan in the new workplace if it has a pension plan offered to its employees, and the period that is basis for retirement that the employee has become entitled to in the system and the period that is basis for entitlement to government contribution are kept the same in the plan in the new workplace.
In the event there is no pension plan in the new workplace, the said employee may continue paying contributions in the minimum rate of three percent of the minimum gross wage to be paid during the first six months of the relevant calendar year under the pension plan that the said employee was registered with in the previous workplace.
In the event the new workplace is included in the system, the said employee is enrolled buy the employer in the pension plan of the new workplace.
In the event there is no pension plan offered to employees in the new workplace of the employee who changes his or her job and said employee does not want to continue paying contributions, the pension contract of the employee is terminated. The employee is required to notify the company of his or her request of making contribution payments no later than the end of next month from the change of workplace.
13. Will the employees who have existing contracts in the Private Pension System (BES)
be included in the Automatic Enrollment ?
Yes, all employees who are entitled to being included in the Automatic Enrollment system will be included in the system.
14. Will the employees who are already in the Private Pension System (BES)
be entitled to benefiting from the government contribution of TL 1,000 ?
Participants who have been included in the BES prior to the Automatic Enrollment shall be entitled to benefiting from the initial government contribution of TL 1,000 for one time only in the event they get registered with the Automatic Enrollment and do not exercise their right of withdrawal.
15. What are the Advantages of Automatic Enrollment for those participants who have already been registered with the Private Pension System ?
Participants will have the advantage of 25% government contribution from their Automatic Enrollment contract in addition to the 25% contribution from their existing contracts.
Additionally, if participants remain registered with the automatic enrollment system at the end of the 2-month period of withdrawal, they will become entitled to receiving the one-off initial government contribution of TL 1,000.
In the event of becoming entitled to retirement and transferring the savings to a minimum 10-year annuity, a further “additional government contribution” will be paid up to 5% of the total savings.
Moreover, the limits of the initial government contribution and the additional government contribution paid will be calculated and tracked separately.*
* The annual amount defined for the relevant calendar year may not exceed the gross minimum wage amount.
16. Is it possible to merge the periods that are basis to retirement and Government contribution under the Automatic Enrollment with the periods that are basis to retirement and Government contribution under other BES contracts?
The periods that are basis to retirement and Government contribution along with the other rights and liabilities under the Automatic Enrollment may not be merged with the BES contracts not drawn up under the Automatic Enrollment.
17. Unless employees prefer any funds at the time of entry in the system, in which funds will the contributions be directed for investment? Is there a limit to making
fund distribution changes?
During the first two-month withdrawal period, contributions are directed for investment to the initial fund preferred by either the employee or the employer, as the case may be. The pension company is responsible for fund management ensuring that the contributions paid during the withdrawal period do not depreciate. The savings of the employees whose period of withdrawal has expired and who have not preferred any fund will continue to be forwarded for investment in the relevant initial fund for the next ten months. The savings of the employees who have completed their first year and have not preferred any fund will be forwarded for investment in the standard fund depending on their initial preference of interest-bearing or interest-free funds.
Upon completion of the period of withdrawal, the employee may request for leaving the initial fund or the standard fund. Such employees are offered a risk profile survey with results that are not binding, and contributions and savings are forwarded to investment based on the preference of the employees.
The employee has the right of fund distribution changes; however, such right may be transferred to the portfolio management company, if they prefer so. Such request is filed with the company to be forwarded to the portfolio management company.
18. For those employees who work for more than one employer, is it possible to draw up more than one pension contract with each employer under the automatic enrollment system?
An automatic enrollment contract will be drawn up with each employer of the employee.
19. If there are legal deductions such as attachment/alimony from the salary of the employee (as much as 25% of the salary), will the contribution be deducted
from the salary?
Unless the income that is basis to premium and the pension deduction are not affected, the amount of contribution to be paid shall not change.
20. When the employer is unemployed, is it possible to continue the contract under the automatic enrollment?
If the employer wants to continue the relevant pension plan, he or she has the right of disposal regarding such contract. If the participant wants to continue making payments to the OKS (Automatic Enrollment System) contract after he or she quits work, the participant may continue paying contributions in the minimum rate of three percent of the minimum gross wage to be paid during the first six months of the relevant calendar year.