Country Document Update 2014 Pensions, health and long-term care Turkey
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Country Document
Update 2014
Pensions, health and long-term care
Turkey
March 2014
Author: Oğuz Karadeniz
Disclaimer: This report reflects the views of its authors and these are not necessarily
those of either the European Commission or the Member States.
On behalf of the
European Commission
DG Employment, Social Affairs
and Inclusionasisp country document update 2014 Turkey
Table of Contents
Table of Contents
Table of Contents ..................................................................................................................... 2
List of Abbreviations ................................................................................................................ 3
1 Executive Summary ........................................................................................................... 4
2 Pensions .............................................................................................................................. 6
2.1 System description ............................................................................................................................... 6
2.1.1 Major reforms that shaped the current system ....................................................................................... 6
2.1.2 System characteristics............................................................................................................................ 7
2.1.3 Details on recent reforms ....................................................................................................................... 8
2.2 Assessment of strengths and weaknesses ......................................................................................... 10
2.2.1 Adequacy ............................................................................................................................................. 10
2.2.2 Sustainability ....................................................................................................................................... 12
2.2.3 Private pensions ................................................................................................................................... 15
2.2.4 Summary.............................................................................................................................................. 17
2.2.5 Reform debates .................................................................................................................................... 18
3 Health care ....................................................................................................................... 21
3.1 System description ............................................................................................................................. 21
3.1.1 Major reforms that shaped the current system ..................................................................................... 21
3.1.2 System characteristics.......................................................................................................................... 21
3.1.3 Details on recent reforms ..................................................................................................................... 22
3.2 Assessment of strengths and weaknesses ......................................................................................... 23
3.2.1 Coverage and access to services .......................................................................................................... 23
3.2.2 Quality and performance indicators ..................................................................................................... 26
3.2.3 Sustainability ....................................................................................................................................... 27
3.2.4 Summary.............................................................................................................................................. 28
3.2.5 Reform debates .................................................................................................................................... 29
4 Long-term care................................................................................................................. 30
4.1 System description ............................................................................................................................. 30
4.1.1 Major reforms that shaped the current system ..................................................................................... 30
4.1.2 System characteristics .......................................................................................................................... 30
4.1.3 Details on recent reforms in the past 2-3 years .................................................................................... 31
4.2 Assessment of strengths and weaknesses ......................................................................................... 31
4.2.1 Coverage and access to services .......................................................................................................... 31
4.2.2 Quality and performance indicators ..................................................................................................... 32
4.2.3 Sustainability ....................................................................................................................................... 33
4.2.4 Summary.............................................................................................................................................. 33
4.3 Reform debates .................................................................................................................................. 33
References ............................................................................................................................... 36
Annex – Key publications ...................................................................................................... 41
2asisp country document update 2014 Turkey
List of Abbreviations
List of Abbreviations
Turkish English
ASPB Aile ve Sosyal Politikalar Bakanlığı Ministry of Family and Social Policies
EYHGM Engelli ve Yaşlı Hizmetleri Genel The General Directorate of Disabled
Müdürlüğü and Elderly Services
ÇSGB Çalışma ve Sosyal Güvenlik Bakanlığı Ministry of Labour and Social
Security
EGM Emeklilik Gözetim Merkezi Pension Monitoring Centre
GDP Gross Domestic Product
GIB Gelir İdaresi Başkanlığı Revenue Administration
GHI Genel Sağlık Sigortası General Health Insurance
HM Hazine Müsteşarlığı Undersecretary of Treasury
İŞKUR Türkiye İş Kurumu Turkey Employment Institution
KB Kalkınma Bakanlığı Ministry of Development
OECD Organisation for Economic Co-
operation and Development
SB Sağlık Bakanlığı Ministry of Health
SGK Sosyal Güvenlik Kurumu Social Security Institution
SHÇEK Sosyal Himetler ve Çocuk Esirgeme Social Services and Child Protection
Kurumu Institution
SSK Sosyal Sigortalar Kurumu Social Insurance Institution
SYDV Sosyal Yardımlaşma ve Dayanışma Social Aid and Solidarity Fund
Vakfı
SYGM Sosyal Yardımlar Genel Müdürlüğü General Directorate of Social
Assistance
TÜİK Türkiye İstatistik Kurumu Turkish Statistical Institute (TurkStat)
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Executive Summary
1 Executive Summary
Pensions: In order to increase national saving, the private pension reform was introduced in
June 2012 by Law Number 6327 and the legal changes that came in to force on 1 January
2013.The new system has a state contribution matching of 25 % of contributor premiums built
it and is limited to the annual gross minimum wage. Moreover, the maximum administrative
and fund management fees of private pension funds were reduced with the reform. The tax
deduction for employers was increased from 10% to 15% of the employee salary. In the
public pension scheme, fair adjustment in pension amounts was implemented in January
2013. With the new pension adjustment system, pension amounts for pensioners who retired
in different years were aligned and nearly 1.7 million pensioners' pension amounts were
increased. The pension expenditures have increased from 7.9% in 2012 to 8.3% of the GDP in
2013. The main reasons for the rise in pension expenditures have been a rise in the inflation
rate and the adjustment pension amounts. Additionally, the definition of invalidity was
extended in August 2013 (the means-tested old-age pension scheme threshold was increased
and the means-testing rules were changed in 2013 with Law Number6495.)This means that
more poor elderly and disabled citizens who have no social security can achieve a minimum
income more easily. The Social Assistance Law was changed with Law Number 6353. Due to
this reform, social security contributors can benefit from social assistance, provided that their
household income per capita is below the poverty threshold. A new means-tested survivor’s
pension programme was launched for survivors in 2012.
Health: The Occupational Health and Safety (OHS) Law covering all workers came into
effect on 30 June 2012. The OHS Law adopts a preventative approach in order to reduce the
occurrence of work injuries and occupational diseases. The General Health Insurance was
extended in 2012 and 2013 to people who have just graduated from high school, orphans and
women under the protection of the state against family violence. The rate of the population
that is not covered by any health insurance decreased from 6.52% in 2012 to 1% in 2013.
Although the general health insurance scheme covers everybody in Turkey, there have been
some de facto coverage problems because of a variety of reasons. The debts of inappropriate
health expenses due to misuse of health insurance were written off by Law Number 6385. The
additional fee which is collected from insurees by private hospitals increased from 90% to
200% of SGK’s service prices with Law Number 6486. This means that out-of-pocket health
care payments will increase over the next few months. Turkey has tried to implement two
main projects in the past two years in order to cope with the misuse of health services. The e-
prescription project was launched in July 2012. It aims to prevent fraudulent and false
prescriptions. The Prescription Information System (PIS), which can evaluate and monitor
prescriptions, covered all physicians in 2013.The Rational Drug Using National Plan (2013-
2017) was prepared in order to provide coordination and cooperation and to create awareness
about rational drug use. The palm-print recognition project, which launched 2012, also aims
at limiting inefficiencies and misuse. This project was extended to all private hospitals by the
end of 2013.
Long-Term Care: In Turkey, there is no long-term care insurance system. The elderly are
usually taken care of within their own family. It is a family obligation. Irrespective of age, a
means-tested monthly payment of the net minimum wage is paid by the Ministry of Family
and Social Policies (ASPB) to a family member caring for a disabled person in need of care
living at home. If the person is cared for in a care home, a payment of double the minimum
wage is paid by ASPB. Elderly people can, obviously, also benefit from this system. The
number of people benefiting from the system had reached 427,484 by December 2013. There
have been no major reforms of the long-term care system, except for the institutional reform
4asisp country document update 2014 Turkey
Executive Summary
process. The Care Services Quality Standards were published by the EYHGM in 2013.The
efforts on establishing a long-term care insurance scheme have continued. ASPB prepared a
draft report and projections on contribution effects of an introduction of a long-term care
insurance. According to the projections, contribution ratio changes between 1.5% to 3% of the
contribution base, depending on the long-term care financing model and coverage. In
February 2014 ASPB’ Organization Law was amended by Law No: 6518. Due to the new
reform, ASPB can provide long term care services for needy elderly people aged above 65+
via purchasing care services by the Public Procurement Law. In addition, ASPB can finance
care services which are provided by other public institutions and municipalities. Thus, local
governments (municipalities) are stimulated to offer care services to ASPB. With the new
law, the poverty threshold for home care benefit eligibility was increased in case more than
one disabled lived in the household.
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Pensions
2 Pensions
2.1 System description
2.1.1 Major reforms that shaped the current system
The pension system in Turkey has experienced financial deficits since the beginning of the
1990s for various reason such as the high number of undeclared work and workers, low
premium collections, high replacement rates and early retirement. In 1999, the
implementation of Law Number 4447 brought changes in the pension parameters. For
example, the minimum retirement age of women was increased from 38 to 58 and the
retirement age of men was increased from 43 to 60. However, the retirement age of those
people who started work before the reform was not increased. Instead, it was determined
according to the year they started to work. Thus, the cost of early retirement has been
transferred to future generations. With the 1999 reform, the minimum pension was decreased
from 70% to 35% of an insuree’s minimum wage. Moreover, the average income of all years
was taken as the basis for pension calculations, instead of focusing on the average of the last
ten years (See Law Number 44471). These precautions were not enough to reduce the deficit
of the social security system, so a new law (Law Number 55102) was implemented on 1
October 2008, designed to tackle the deficits of the pension system by reducing the accrual
rate and increasing the retirement age. The retirement age will gradually increase for persons
who started work for the first time after this reform and will reach 65 years for both men and
women by 2048 (Table 1). The life expectancy at birth is estimated at 74,7 years for male and
at 79,2 years for females (2013) (TÜİK, 201/a3:40).
Table 1: Retirement Age for New Insurees (entering the labour market after2008)
Years Male Female
2008-2035 60 58
2036-2037 61 59
2038-2039 62 60
2040-2041 63 61
2042-2043 64 62
2044-2045 65 63
2046-2047 65 64
2048- 65 65
Source Law No: 5510
1
Date: 08 September 1999 - Number: 23810 Official Gazette
2
Date: 16 June 2006 - Number : 26200 Official Gazette
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Pensions
Moreover, pension premium payments of self-employed workers , workers and civil servants
who started work after the reform were aligned (see Karadeniz, 2011).Besides the voluntary
private pension system providing complementary pension income was introduced in 2001
with the Law Number 4632.3
2.1.2 System characteristics
The pension system in Turkey consists of programmes which provide a PAYG-financed
social insurance system, a tax-financed minimum pension, as well as voluntary private
pension funds financed by defined contributions (see Figure 1). There have been no changes
in the main pension indicators and systems in the reporting period.
Figure 1: The Turkish Pension System
Social Security Ministry of Family and Social
Individual Private
Institution Policies (Non-contributory
(Contributory System)
system) Retirement Funds
Law No:2022 (tax-financed
Law No:5502 and 5510 minimum pension) (Voluntary)
General Directorate
of Pension Services Social Aids and
Solidarity Funds
General Directorate
of Social Insurance
Contributions
Source: Karadeniz, O.
Number of the contributory days and retirement age
The required number of contributory days is 7,200 for workers. Civil servants and self-
employed workers, however, have to accrue 9,000 days (Law Number 5510, Article 27). The
retirement age is 58 for women and 60 for men who started work for the first time after the
1999 reform. But the retirement age will gradually increase for persons who started work for
the first time after this reform and will reach 65 years for both men and women by 2048.
Moreover, there are simplified retirement conditions for part-time workers, miners, people
with physically demanding jobs and disabled people (Karadeniz, 2012).
Individual Pension Funds
3
Date: 7 April 2001, Number 24366, Official Gazette
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Pensions
In Turkey, there is no additional second-pillar pension scheme available beyond the PAYG
defined-benefit first-pillar system, which is financed by public social security funds (ÇSGB,
2007:18). The voluntary private pension system serves as a third pillar, and not as a second
pillar, unlike in many other countries. Joining the private pension system is optional. There is
a tax incentive for the participants and the employers who pay contributions. The same
incentive is provided, regardless of whether the participant receives a lump sum or a pension
payment. The person is required to be over the age of 56 in order to receive a pension from
this system (Law Number 4632, Article 6).
There are 13 private pension companies within the private pension system. In March 2014,
4,362,435 persons paid contributions. The amount of contributions by 14thMarch 2014 (since
2003) was TL422,722,200,000 and the total funds amounted toTL25,886,000,000.5
Social Assistance
Social assistance and services financed by taxes are structured and organised within various
institutions and programmes. Social assistance includes old-age pension, invalidity pension,
war veteran’s pension, survivor’s pension and orphan’s pension.
A means-tested pension scheme was introduced in 1976 (Law Number 2022) and it includes
the following pension provisions:
a) Means-tested old-age pension: It provides old-age pension for poor and elderly citizens
above 65 years of age. In October 2013, the poverty threshold was one third of the minimum
wage per person and the pension payment amounted to TL 125.60 (EYHGM, 2013/a).
b) Means-tested old-age pension for needy disabled persons: It provides old-age pension for
poor, needy, disabled and elderly citizens above 65 years of age. In October 2013, the poverty
threshold was one third of the minimum wage per person and the pension payment amounted
to TL 376.79 per person for people who are disabled to a degree of 70% or more (EYHGM,
2013/a).
c) Means-tested disability pension for disabled people and their families: It provides a
disability pension for poor disabled persons aged 18 to 64. The poverty threshold in October
2013 was one third of the minimum wage per person and the pension amounted to TL 219.29
for disability degrees between 40% and 69%. When the disability level of a person is 70% or
higher, the disability pension amounts up to TL 376.79 (EYHGM, 2013/a). If a disabled
person under the age of 18 is cared for by a relative, who is in financial hardship, this carer is
eligible for a disabled relative’s pension (TL 219.29) (EYHGM, 2013/a).
d) Means-tested survivor’s pension: It provides for survivors who do not receive a pension
from the contributory system. The pension amount is TL 250 per month. It is financed by
taxes and administrated by the SYDV.
2.1.3 Details on recent reforms
Private pension reform: In Turkey, national private savings are not sufficient, and stood at
roughly 9.7% of GDP in 2013 (KB; 2013/b: 17)). In order to increase national saving, the
private pension reform was introduced in June 2012 by Law No:63276 and the law changes
that came in to force 01st January 2013.The private pension reform includes four main
measures aimed at increasing the amount of contributors and funds:
4
One Euro equals TL 2,72 (1st October 2013) http://www.tcmb.gov.tr/kurlar/201310/01102013.html,
accessed on 29 November 2013.
5
http://www.egm.org.tr/weblink/BESgostergeler.htm accessed on 21st March 2014
8asisp country document update 2014 Turkey
Pensions
1- State contribution matching instead of tax deduction: The previous system had a tax
deduction tool which covered the income taxpayer only. However, nearly 25% of active
contributors were not subject to income tax (housewives, etc.). It is estimated that only 35%
of total contributors were benefitting from tax deduction (İçöz, 2012, Özel Yalçın, 2013). The
new system features state contribution matching. It amounts to25% of the contributor’s
premium and is limited to the annual gross minimum wage. State contributions will be vested
after three years of participation and will increase gradually during the contribution period.
Contributors are able to access 100% of state contribution (and any return on it) when they
complete the age of 56 (i.e. the private pension retirement age). Contribution matching will
cover not only income taxpayers but all contributors, including housewives, etc. (İçöz, 2012).
2- Reducing administrative and fund management fees of private pension funds: The
maximum administrative fee was reduced from 8% of premium to 2%. Moreover, the
maximum annual fees for fund management decreased from 3.76% to 2.28% with a new
regulation which came into force in November 20127.
3-Tax exemption for contributions: Contributions were taxed when contributors withdrew
their savings before the reform. After the reform, only investment gains are taxed.
4- Increasing tax deduction for employers: Tax deduction for employers was increased from
10% to 15% of the employee salary.
Fair Adjustment in Pensions: Fair adjustment in pension amounts was implemented in
January 2013. Before the reform, pensioners who worked for the same periods were receiving
different pension amounts, depending on their year of retirement (Karadeniz, 2012). There
were six pension calculation periods (ÇSGB; 2013:32). With the new fair adjustment system,
pension amounts for pensioners who retired in different years have been aligned. Thus,
pension amounts were increased for 1,783,708 pensioners. It is estimated that the annual cost
of the new fair adjustment system is nearly TL 2.7 billion (ÇSGB, 2013:32,33).
Extension of Coverage Definition of Invalidity: The SGK Invalidity Regulation was changed
and the coverage definition of invalidity was extended in August 2013.Various disorders such
as Down syndrome and autism were added to the SGK Invalidity Regulation. Some
neurological and psychiatric disorders, as well as heart, lung and digestive system diseases
were added to the SGK Invalidity Regulation by creating a detailed list. It is estimated that
4,250 person will benefit from this new regulation, whose cost is estimated to be approx. TL
40 million, which is 0.5% of the total budget per year (SGK, 2013/a).
Increasing means-tested old-age pension scheme threshold: The means-tested old-age
pension scheme threshold was increased by nearly 100% in August 2013 (by Law Number
6495). Thus, the coverage of the means-tested old-age pension scheme has been expanded, so
that more poor elderly and disabled citizens who have no social security can achieve a
minimum income more easily.
Reforming Social Assistance Law: One of the biggest problems in Turkey is unregistered
employment and contribution evasion. However, the social assistance laws could cause more
people to work in unregistered employment, because in order to receive benefits, a person was
not allowed to work regularly, according to the former social assistance legislation. Thus,
employees were reluctant to work as registered workers, so that they could continue to receive
social assistance benefits (Karadeniz, 2012/a). The Social Assistance and Solidarity Law was
changed with Law Number6353. Thanks to this reform, social security contributors can
benefit from social assistance provided that their household income per capita is below the
poverty threshold, which is one third of the net minimum wage.
7
Date 09/11/2012 Number:28462 Official Gazette
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Pensions
The means-tested survivor’s pension programme: The poverty ratio is high among widows
in Turkey (Özar, et al., 2011). The government launched a new programme for widows who
do not receive a pension (from the contributory system). It is financed by taxes and is
administrated by the SYDV. Nearly 212,000 widows receive a survivor pension with this new
programme8.
2.2 Assessment of strengths and weaknesses
2.2.1 Adequacy
According to TÜİK Income and Life Condition Survey (2012) the poverty rate among elderly
people has increased from 17.2% in 2011 to 18.7% in 2012. For males aged 65+ years the
poverty rate is 157.7%, and for females it is 19.4% (TÜİK, 2014). The most important income
source of elderly people is social transfers (76.6% of total income) in Turkey. This ratio was
74.7% in 2011 (TÜİK, 2014). Another study examined elderly poverty and the social
protection system in Turkey (Karadeniz, Durusoy, 2013). As the results in Table 2 show, in
2010 47.6% of needy elderly people received means-tested old-age benefit (non-contributory
system), 8.8% received old-age pension (contributory system), 1.5% received survivor’s
pension and 2.6% social assistance benefit. This means that 38.5% of needy elderly people
did not receive any benefits at all. As a comparison, this figure was 41% in 2009 (Karadeniz,
2012).
Table 2: Distribution of needy elderly people by social benefits and gender (in 2010),
(in %)*
Those in receipt of
Type of social benefits Gender social benefit
Male 18.80
Means-tested old–age benefit (non-contributory Female 28.90
system) Total 47.60
Male 8.10
Female 0.70
Old–age pension (contributory system) Total 8.80
Male 0.00
Female 5.10
Survivor benefit Total 5.10
Male 1.50
Female 1.10
Social Assistance Total 2.60
*Needy elderly people = elderly people (65+) whose income is below 60% of the medianincome.
Source: Karadeniz, Durusoy, 2013 (calculated by authors using TÜİK Household Budget Survey 2010 data)
One study analyses and criticises the pension reform, from gender equality perspectives
(Elveren, 2013). According to the author, the pension system in Turkey is based on a male
8
http://www.zaman.com.tr/gundem_esi-vefat-eden-244-bin-kadina-maas-baglandi_2069229.html (Accessed
on 27 October 2013).
10asisp country document update 2014 Turkey
Pensions
breadwinner and women are described as dependants. Women have been negatively affected
by the pension reform in Turkey. The social insurance system does not consider the welfare
effects of women's unpaid labour and household production in the society and it covers only
40% of working women. It only provides women with the right to be voluntarily insured
(Elveren, 2013:7). The pension reform has offered unaffordable premium conditions for
women in the lower strata via a voluntary insurance programme. Thus, the author estimates
that new regulations may cause a higher poverty rate among elderly women. With the pension
reform, the correlation between pension amounts and contribution is reinforced. It can be
detrimental for women who already cannot find decent jobs (Elveren, 2013:7). Thus, there is
need for a gender-sensitive social security system in Turkey. A well prepared employment
policy especially designed for women should be implemented, in order to increase female
employment and access to social security (Elveren, 2013:8). According to the author, if
specific measurements that positively discriminate women and increase female labour
participation are not taken, the pension reform will have a detrimental impact on the well-
being of women in the long run (Elveren, 2013:1).
According to the Ministry of Labour and Social Security (2013), minimum pensions increased
in real terms between 2002 and 2013. As can be seen in Table 3, an employee’s minimum
pension increased by 48%, a tradesman’s (self-employed) minimum pension increased by
107.4%, and a farmer’s minimum pension increased by 249% in real terms between 2002 and
2013.
Table 3: Minimum Pension Amounts in TL, Nominal and Real, Rate of Increase of
Minimum Pensions (in %), (December 2002-January 2013)
December 2002 January 2013 Nominal Rate of Real Rate of
Insuree Type (TL) (TL) Increase Increase
Employee 257,1 922,5 258.80% 48%
Casual Agricultural
Employee 216,3 831,8 284.50% 58.60%
Tradesman (Self-
employed) 148,7 747,7 402.80% 107.40%
Farmer 65,8 558,12 748.20% 249.80%
Civil Servant 376,6 1,118,1 196.92% 22.50%
Source: ÇSGB 2013/a: 33
The social insurance system excludes some workers such as low-income craftsmen and
tradesmen, farmers and causal agricultural workers (Karadeniz, 2012). If they fail to register
with the social insurance system now, they will probably fall under the social assistance
system in the future. According to the TUIK Income and Life Condition Survey (2012), high
income groups (fourth and fifth) receive the majority of pensions and survivor benefits. While
43.6% of pension and survivor benefit recipients are in the top income group (fifth quintile),
only 2.4% are in the first quintile. Compared to pensions, other social transfers are distributed
more equally (see Table 4).
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Table 4: Quintiles ordered by equalized household disposable income and distribution
of annual incomes by types of social transfers, 2012*
Second
First 20% 20% Third 20% Fourth 20% Fifth20%
Social transfers 4.0 9.2 18.2 26.7 41.9
Pensions and survivor benefits 2.4 8.4 18.2 27.3 43.6
Other social transfers 23.0 17.8 18.3 18.9 21.9
* "When the individuals are sorted in ascending order by equivalised household disposable income and divided
into 5 parts, the bottom income group is defined as “the first quintile” and the top income group is defined as
“the last quintile”.
Source: TUIK Income and Life Condition Survey, 2012
There have been early retirement demands from employees who started to work before the
first pension reform in 1999 and who have been affected by the pension reform, as their
retirement age has gradually increased. Thus, although they have completed the necessary
contributory periods, they now also have to work until they reach a higher retirement age .In
Turkey, the social assistance system has a fragmented structure and applies different poverty
thresholds for each social aid. Thus, the demands have been sparked by both insecurity in
terms of potential unemployment in the future and lack of an effective and regular social
assistance system, which leads people to perceive early retirement as a form of income
security (Arıcı, 2013). The government, however, rejects any demands. Moreover, the de
facto unemployment insurance coverage is limited. The unemployment insurance system only
covers employees. The eligibility criteria of unemployment allowance are harsh.9 It is
estimated that only14.5% of unemployed persons are eligible for unemployment allowance
(Mütevellioglu, 2013:183).
2.2.2 Sustainability
Pension expenditures have increased from 7.9% in 2012 to 8.3 % of GDP in 2013. The main
reasons for the rise in pension expenditures have been a rise in the inflation rate and the
corresponding adjustment of pension amounts (KB, 2013/b:52)10 On the other hand, social
security contribution revenue has increased due to an increase in registered employment. The
financial deficit has decreased from 1.58% in 2012 to 1.30 % of the GDP in 2013 (excluding
government contributions). However, the budget transfer (including government
contributions) to SGK has increased from 4.5 % in 2012 to 4.6 % of GDP in 2013 (KB;
2013/b: 69)11.
9
An unemployed person must have at least 600 days of contributions in the last three years before
unemployment, including within the last 120 days. The unemployment benefit duration can varybetween six
to ten months, depending on contribution periods (see Law:no:4447).
10
Pension expenditure is an estimates for 2013, pension expenditures includes unemployment benefit as well as
SGK expenditures except health expenditures (KB; 2013/b: 53)
11
Contribution revenues include health insurance contributions. Thus, the financial deficit rates cannot be
seperated by pension and health insurance deficits.
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Pensions
There are two main papers about pension projections in the reporting period. The first of them
was a forecast by the SGK (Sevinc, 2013). According to this forecast, the social security
budget deficits will decline to below 1% of GDP by 2030 if state contributions are excluded.
This figure was 2.5% if state contributions were included.
Figure 2 The Social Security Deficits as Share of GDP (%) (2009-2030)
4,5
Social Security Deficits as Share of GDP
4,2
4
3,5
3 3 3,1
2,9
2,5 2,6 2,5 Including Government
2 Contribution
1,5 1,5 Excepting Goverment
1,3 Contribution
1 1,1
0,9
0,5
0
2009 2012 2016 2024 2030
Years
Source: SGK in Sevinç, 2013:17
The second paper (Alper, et al., 2012) forecast the social security (pension)
income/expenditure compensation rate until2050. According to the authors, contribution
incomes will increase more rapidly than pension expenditures until 2018, thanks to the
pension reforms which were realized in 1999 and 2008 (Alper, et al., 2012:111-112, Alper,
2013:37). Thus, compensation rates (income/expenditure) will recover until 2018. After 2018,
the income/expenditure compensation rate will decrease, and by2045, the positive impact of
pension reforms will come to an end (Alper, 2013:37). The new pension formula’s effect of
low pension benefit will be seen by approx.2040 (Alper, et al., 2012:117-119).
The minimum pension amounts decreased from 70% of minimum wage to 35% of insurees’
average wage in 1999 with Law Number 4447. The accrual rate was decreased in 2008 from
3% to 2% per year. The replacement rate has decreased since 2008. The reform has affected
employees who started to work before 2008. As long as they work, their prospective pension
amounts will reduce (Kurt, 2011, Karadeniz, 2012, Kızılot, 2013/a). Thus, we estimate that
many employees who started to work in the 1980s will either exit the labour market or work
as unregistered in the future to avoid negative effects on their pension levels. The accrual rate
has a discouraging effect for older workers.
As Table 5 shows, the female labour participation rate increased by nearly 5% between 2008
and 2013. This is a positive development in terms of sustainability of the pension scheme.
However, in the female age group 40-44 witnesses the highest increase. In this group, the
employment rate increased from 26.8% in 2008 to 38.5% in 2013. We estimate that active
labour market policies which have been implemented within the last three years, such as
contribution incentives, workfare and vocational training programmes, have had a positive
effects on female employment rates in Turkey. Since 2009, Turkey has implemented active
labour market policies to cope with unemployment and to ensure an increase in especially
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women employment ratio. Nearly 1.5 million persons have participated in these programmes
between 2009 and 2013. 42% of total participants in these programmes are women. The
women participation ratios in vocational training and entrepreneurship programmes are 59%
and 47% respectively (Karadeniz, et al., 2014). On the other hand we estimate that home care
services are financed by the ASPB and health care reform have a positive effect on female
employment (see section 2 and section 3) .
Table 5: Employment Rates by Age Groups and Gender (%), (2008-2012)
Male 40-44 45-49 50-54 55-59 60-64 65+ Overall
2008 85.9 74.1 59.5 44.6 35.8 19 62.6
2009 84 74 58.1 44.9 35.9 19 60.7
2010 85.5 77.1 60.2 46.3 37.7 20 62.7
2011 87.2 80 63.8 49.7 39.6 21 65.1
2012 88 80.5 64.2 50.8 40.4 20 65
2013 88 80,5 64,2 50,8 40,4 19,9 65,2
Female 40-44 45-49 50-54 55-59 60-64 65+ Overall
2008 26.8 23.3 19.6 16.2 13 5.7 21.6
2009 29 23.9 20.7 17.4 14.3 5.9 22.3
2010 33.1 26.9 22 18.8 14.9 5.9 24
2011 35 30.6 24 19.8 15.6 6.5 25.6
2012 37.2 31.6 25.3 19.6 15.9 6.4 26.3
2013 38,5 33,1 25,6 20,1 15,9 6,2 27,1
Source: TÜİK Household Labour Force Survey Database 2008- 2013
In Turkey, if pensioners return to work, they and/or their employers have to pay social
security contributions. The current contribution rate is 15% of their old-age pension amount
for self-employed workers. It is 30% of wages for employees, of which 7.5% is the
employee's share and 22.5% is employer's share. This contribution is like a tax and it does not
raise their pension amounts. Thus, the social security contribution has a negative effect on
registered employment. Nearly 1.6 million old-age pensioners carry out unregistered work in
Turkey (Karadeniz, 2012/b). Table 6 shows the unregistered employment rates by age groups
between 2004 and 2013. As it seems, the overall unregistered employment rate decreased
from 50% in 2004 to 37.6% in 2013. In order to prevent contribution evasion and to provide
compliance in the social security system, cooperation and coordination among social security
institutions and related organisations should be ensured, innovative inspection approaches and
models should be developed, capacity building of inspectors should be strengthened, as well
as participative and self-control mechanisms in the inspection systems should be established
(Özsuca, Gökbayrak, 2013).
14asisp country document update 2014 Turkey
Pensions
Table 6: Unregistered Employment Rates by Age Groups (%), (2004-2012)
Difference between 2004
Age Groups 2004 2013 and 2013
70.0 -14.0
15-19 84
20-24 59 36.0 -23.0
25-29 42 24.0 -18.0
30-34 39 24.2 -14.8
35-39 38 26.1 -11.9
40-44 40 30.2 -9.8
45-49 45 35.9 -9.1
50-54 58 50.8 -7.2
55-59 69 62.9 -6.1
60-64 79 74.4 -4.6
65+ 84 83.3 -0.7
Overall 50 36.7 -13.3
Source: TÜİK Household Labour Force Survey Database (2004-2013)
2.2.3 Private pensions
The private pension system coverage is limited in Turkey and only covers middle and high-
income groups having the financial capacity to save. However, the private pension scheme
was reformed in June 2012. A new law now stipulates state contribution matching, which was
implemented on the 1st of January 2013 to replace the application of tax deduction. It covers
all persons, whether they are taxpayers or not. Since the reform, the number of contributors
has increased rapidly from 3.1 million in January 2013 to nearly 4.3 million persons by March
2014(EGM, 2014). With the assumption that everybody paying premiums to individual
pension funds also pays premiums to the public social insurance system, the rate of people
additionally insured within the private pension schemes increased from 15.1% in 2011 to
21.8% in December 2013 (See Table 7). We estimate that private scheme contributors will
increase over the coming years as a result of the new state contribution matching system. The
cost of the reform for the State is estimated TL 1. 95 billion (nearly 0. 5% of the state budget)
for 201412 . However, fund management and administrative fees are still very high compared
to other countries, in spite of the recent decrease as part of the last private pension reform.
The returns of the private pension plans are lower than other investment tools. Thus, private
pension companies should aim at decreasing their administrative costs in order to increase
participation in the system (Ozel, Yalcın, 2013).
12
http://ekonomi.milliyet.com.tr/hukumetten-bes-e-2-milyar-liralik/ekonomi/detay/1798388/default.htm,
http://www.dunya.com/iste-2014-butcesi-204833h.htm accessed on 29 November 2013
15asisp country document update 2014 Turkey
Pensions
Table 7: Private and Public Pension Scheme Contributors 2005-2013 and Funding
Amount per Participant (TL) in Private Pension Scheme
Funding
amount per
participant
(TL) in
Private
Private Pension Schemes Public Pension Schemes (A/B) in Pension
Years 'Contributors (A) 'Contributors (B) % Scheme
2005 672,696 13,156,439 5.1 1,661
2006 1,073,650 14,124,935 7.6 2,415
2007 1,457,704 14,763,075 9.9 2,687
2008 1,745,354 15,041,268 11.6 3,133
2009 1,987,940 15,096,728 13.2 3,573
2010 2,281,478 16,196,304 14.1 4,171
2011 2,641,843 17,483,524 15.1 4,691
2012 3,128,130 18,352,859 17.0 5,172
2013* 4,126,956 18,886,989 21.8 6,020
* Private pension scheme data is for December of 2013 and public pension scheme’scontributors’ is for
December 2013.
Source: EGM, 2014, SGK, 2013/b, Karadeniz, 2012
Figure 3 indexes the number of contributors to the private schemes and the funding amount
per participant (2004=100). It is evident that, despite the positive developments in the number
of private pension scheme contributors, the funding amount per participant is still low.
Figure 3: Private Scheme Contributors and Funding Amount per Participant as Index
(2004=100)
1400
1237
1200
1000 995
841
800 Contributors numbers
726 (2004=100)
600 633 Funding amount per
555 564 563
511 participant (2004=100)
464 455
400 389
342 341
263 293
200 214
181
100
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: author’s own calculations using EGM data
16asisp country document update 2014 Turkey
Pensions
As Table 8shows, the fund’s total net assets share in government bonds and bills is nearly
54% in 2012. The fund’s total net assets share in stocks increased to 7.12% in 2012, from
6.29% in 2011 (EGM, 2013). The stocks share had the biggest annual return in 2012
(53.36%).
Table 8: The Share of Fund Group Net Asset Value in the Total and Annual Return of 2012
The Share of Fund Group Net
Fund Groups Asset Value in the Total (%) Annual Return of 2012*(%)
Government Bonds and Bills (TL) 49.75 12.49
Liquid 8.3 6.83
Flexible 29.05 22.03
Balanced 1.42 26.68
Stocks 7.12 53.36
Government Bonds and Bills (Foreign Currency) 3.93 12.49
International 0.42 -0.41
* Returns are weighted through daily net asset values. The funds offered to public in 2012 are excluded from the
calculations.
Source: EGM, 2013:66
2.2.4 Summary
Turkey has implemented eight different social security contribution reduction programmes in
order to stimulate both labour market participation and investment since 2008. The most
widely utilised programme is the general contribution incentives programme. 5% of the total
employer’s share of the pension contributions (employer’s contribution is 11% of wages) are
financed by the state budget. This represents a 25% reduction of the contribution costs for
employers. The main criteria for employers’ eligibility are regular payment of contributions
and not employing uninsured employees (Law Number 5510). The aim of the incentives
programme is to cause an increase in both registered employment and regular payment of
contributions. It is estimated that the contribution collection rate increased from 80% in 2008
to 92% in 2012 as a result of this incentives programme (Mehmet Bulut, SGK, Former Head
of Contribution Collection Department, and Personal Communication on 26 October, 2013).
68% of all workplaces benefitted from this programme in 2012 (Kabakçı Karadeniz,
Karadeniz, 2013). The second important incentives programme is aimed at increasing
employment rates of both young unemployed males aged 18-29 and unemployed females
aged over 18. If an employer employs an unemployed person from these two groups as an
additional employee, the total employer’s share of social security contributions will be paid
by the Unemployment Insurance Fund. The incentive period is up to four years, depending on
whether unemployed persons register with the Employment Agency ISKUR or not and on
their level of education (Law Number 4447, temporary article 10). 6% of all workplaces
benefitted from this programme in 2012 (Kabakçı Karadeniz, Karadeniz, 2013). The third
contribution incentive programme worth mentioning is related to the Research Development
Investment. Half of the employer’s share of contributions is financed by the Ministry of
Finance (Law Number 5746,Article: 3). As an addition to the scope of the new investment
incentives package, the share of employer’s contribution is financed by the Ministry of
Economy for priority investments (Law Number 5510, adding article 2). It came into effect at
the beginning of 2012 and it will run until 2023.
17asisp country document update 2014 Turkey
Pensions
One of the biggest problems in respect of social insurance financing is undeclared work,
which causes contribution evasion, in spite of the positive improvements in this field.
Unregistered employment decreased from 50% in 2004 to 37.6% in 2013 (See table 6), thanks
to both economic growth and social security reforms. It is considered that various reforms
such as contribution incentives, reforming the inspection system, reducing bureaucracy, as
well as increasing coordination and cooperation among public institutions have led to a
decrease in both unregistered employment and contribution evasion (Karadeniz, 2012).
The following measures need to be adopted in order to increase pension scheme effectiveness
and sustainability:
1- Promoting older employment: The accrual rate should be increased gradually after the age
of 55 every five years to raise the labour participation rate of older people. Active ageing
policies which include re-training of older workers should be implemented. Social security
contributions which are taken from pensions of working pensioners should be abolished, so
that the registered employment rate can increase for older workers. Moreover, a new flexible
pension scheme programme which combines work and pension should be developed.
2- Increasing female employment rate: The female employment rate should be supported and
increased.
3- Increasing registered employment and preventing contribution evasion: Policies promoting
registered employment should be continued. In particular, the under declaration of wages
should be prevented.
4- Preventing early retirement demands: The social assistance system should be reformed and
unified under a single roof. A minimum income guarantee, financed by taxes, should be
established. Unemployment insurance (de-facto) coverage should be extended and the
entitlement criteria of unemployment benefits should be simplified. A severance pay fund
should be established, so that employees who exit the labour market in their fifties can have
income security until they reach the official retirement age without having to take early
retirement.
2.2.5 Reform debates
The most important publication about pension reforms is the 10thDevelopment Plan (for2014-
2018). According to the plan, reforms will be realised as follows (KB, 2013/a):
1- The parameters used for the calculation of pensions will be regulated to encourage a
longer working life, in order to recover the actuarial balance of insuree/retiree ratio
2- In order to cope with unregistered employment and contribution evasion, inspection
mechanisms, coordination, IT infrastructure and awareness campaigns will be
developed.
3- Social security legislation will be simplified and the bureaucratic formalities which
estrange people from the social security system will be reduced.
4- The awareness of the rights and obligations of persons in respect of social security and
the awareness of access channels to social security programmes will be provided.
Moreover, the accessibility of social security channels will be increased.
The 2014 Yearly Development Plan also contains reform efforts concerning the pension
schemes.
18asisp country document update 2014 Turkey
Pensions
1- The pension accrual rates will be regulated in order to promote longer working life
(KB, 2013/b:143)
2- Another measure is related to coping with unregistered employment and increasing
contribution collection in 2014. The employers who employ unregistered employees
will be banned from public tenders (KB, 2013/b: 172). The data sharing will be
extended among the institutions to prevent unregistered employment and risk based
inspection will be promoted. Automatic electronic encashment will be implemented to
increase the contribution collection ratio. An agreement will be made between banks
and SGK by end of 2014. (KB, 2013/b: 143).
3- Administrative and fund management fees in the private pension scheme will be
decreased and their average returns will be converged to international levels in order
to promote national savings by end of the 2014(KB; 2013/b: 162).
There is further debate about the severance payment fund. According to the Labour Law,
employees currently have the right to severance pay in case of dismissal, resignation for
military services, marriage, retirement, and completion of pension contributory periods. But
there have been some problems about severance pay, especially in SMEs during times of
economic crises, bankruptcy, etc. It is estimated that roughly 10% of employees are entitled to
severance pay (ÇSGB, 2013/b). The Turkish government has planned to create a severance
payment fund for two years. Both trade unions and employers organisations have opposed this
plan. However, if the severance pay fund is established, savings for retirement will increase
and the labour relations conflict will be solved.
During the reporting period The EU Commission published both 2012 and 2013 reports.
According to the European Commission’s Progress Report (2012: 66), there has been some
positive progress in the field of social protection between May 2011 and May 2012, such as
increasing the number of insurees by 9%.
However, in order to cope with the deficit of the pension system, efforts need to be
reinforced: active ageing policies should be implemented, undeclared workers should be
registered, under declaration of salaries should be prevented, and the efficiency of the social
security system should be boosted (EC, 2012:66). In October 2013, the European
Commission’s Progress Report (2013) was published. According to the new report, the female
employment rate is still too low in spite of the upward trend in recent years. The state
contribution to social security premiums (contribution incentive) is causing positive results for
female employment, as well as for reducing undeclared work (EU; 2013:40).
A decreasing trend about unregistered employment continued in the non-agricultural sector.
SGK continued its efforts to cope with undeclared work. The number of the registered
employees (insured) increased by 1 million in 2012. However, under declaration of salaries is
still a problem. Besides, the registration of part time and domestic workers needs to be
improved (EC; 2013:40)
The ratio between the number of insurees contributing to pension schemes and pensioners’
number increased. Thus the financial incentives launched in order to promote complementary
private pension schemes showed first effects. However, the social security system faces
financial deficits that are caused by increasing pension and health expenditures. The active
ageing policies to complement efforts in the field of social security are not created (EC;
2013:41).
The Pre-Accession Economic Programme (2014-2016) was published in January 2014.
According to the programme, the restructuring of the contribution debts (partly contribution
amnesties) which threaten the actuarial balance of the social security system will not be
implemented except for exceptional circumstances such as economic crises and natural
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Pensions
disasters (Republic of Turkey, Pre-Accession Economic Programme, 2014:41). Besides, work
on the reform process within the SGK continues in order to establish financial sustainability
and to supply quality services with effective inspection mechanisms. In this context, projects
for operations covering all social insurance branches are under way. (Republic of Turkey, Pre-
Accession Economic Programme, 2014:80).
Increase in female employment and decrease in unregistered employment are the two most
important factors in terms of both promoting social inclusion and ensuring sustainable
pension schemes in Turkey. In another scientific report, the authors recommend: Firstly to
increase the labour participation rate through the promotion of female and youth employment
and secondly, to reduce undeclared work. The development of new policies is particularly
needed in order to register youth, female and casual agricultural workers (Alper, et al.,
2012:118).
In this context, the Pre-accession Programme (2014:71) emphasises the importance of flexible
employment types such as tele-working, job sharing and home based working. According to
the report, flexible employment types need to be encouraged and embedded into the social
security system. Some reforms will be realized in the next terms as following:
1- The regulations ensuring the balance between working and family life will enter into
effect. The flexible employment types facilitating women employment will be
promoted.
2- The severance payment fund will be established. The employees vested rights and the
competition power of the enterprises will be protected.
3- The ISKUR (Turkish Employment Institution) will be strengthened in terms of the
infrastructure and qualified staff. The İSKURs’ job and career counselling services
will be extended and activated.
4- The activities of the private employment agencies will be diversified. The legislation
about the temporary agency work will be completed.
20asisp country document update 2014 Turkey
Health care
3 Health care
3.1 System description
3.1.1 Major reforms that shaped the current system
In Turkey, the institutions and the financing methods of the health care sector had only a
fragmented structure before 2004. The accession of the health services was difficult and was
not equal. In 2003, 32.1 % of the population was paying for health services out of their own
pocket (Karadeniz, 2011/a). The Turkish Government launched the Health Transformation
Programme in 2003. Due to the Health Transformation Programme (Karadeniz, 2011/a,
2012/a):
1- The general health insurance system was established in 2008 and it was extended to
the whole population in 2012. The entire population has access to standardised, equal
and quality health services.
2- The family physicians system was extended to cover the entire country in 2010. The
numbers of physicians and nurses increased.
3- The public health expenditures increased from 2002 to 2012 (see Table.10). The out of
pocket payments decreased and satisfaction with health services increased during to
reform process.
4- The Ministry of Health was restructured and new institutions were founded in 2011. In
order to use the sources as efficiently and effectively as possible, the new Public
Hospital Institution established the Public Hospital Unions in the provinces.
5- The SGK gained monopsony power to purchase and reimburse health care services
through General Health Insurance (Tatar, et.al. 2011:74)
3.1.2 System characteristics
The Turkish general health insurance system covers everybody, with a few exceptions, and
came into effect on 1 October 2008. The general health insurance is financed by premiums.
The premiums are collected by the General Directorate of Social Insurance Contribution of
the SGK. The General Directorate of General Health Insurance purchases the health services.
It does provide its own health services, which means that they have to be purchased from
external health services institutions (Tuncay, Ekmekçi, 2009: 404). Health services can be
purchased at a lump-sum price from health service providers. (Law Number 5510, Article 73).
The price of the health services provided and the price of expenditures for travelling, beds and
daily wages paid by the social security institution are determined by the Commission of
Health Service Pricing (Law Number 5510, Article 72).
The services available through the general health insurance are listed below (Law Number
5510, Article 63):
Protective health services include
1- Outpatient and inpatient care
2- Maternity care (outpatient and inpatient)
3- Dental care (outpatient and inpatient)
4- Artificial insemination treatment (in-vitro fertilisation)
5- Within the scope of the provided treatment methods and services are included:
blood and blood products, vaccines, medicines, prostheses, medical equipment for
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