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Supervising, Regulating, and Developing Pensions in Turkey

Project Development Objective (PDO)

The objective of this project is to assist the Turkish Treasury with improving the regulation, supervision, and coverage of private pensions, which will lead to a more secure, sustainable, and efficient pension system in Turkey.

Background

The Turkish pension system relies largely on the public sector. The system was significantly reformed in October 2008, and changes for new entrants included later retirement, higher contributions, and lower maximum pensions. Although sustainability of the Turkish pension system will likely necessitate additional reform in the future, no major plans for such reform currently exist. 
Turkey has a well-established individual voluntary private pension system that, although rapidly growing, is still small. The Turkish Treasury is therefore seeking assistance to address the country’s low pension coverage, as well as its lack of (a) robust pension regulation and supervision, (b) diversified public and private pension systems, and (c) robust international benchmarks for setting fees for voluntary pension plans.

Activities

Component 1: Diagnostics and benchmarking
The project team is developing an outcomes-based diagnostic report and roadmap by assessing (a) the current state of occupational pension regulation and supervision in Turkey, (b) the evidential base for the newly designed risk-based supervision, and (c) the components of the pension system that most need updated regulations and laws. The team is also conducting an international cost-benchmarking analysis to produce rigorous cost benchmarks for different elements of the pension value chain. 
Component 2: Regulation and supervision
The team is (a) assisting in drafting legal and regulatory amendments to support the implementation of risk-based supervision of occupational pensions, (b) providing a risk-based supervisory framework for occupational pensions, and (c) coordinating training for pension supervisors to implement the risk-based supervisory framework.
Component 3: Expansion of voluntary private pension coverage
The team is using the original output-based aid assessment, as well as the results of the cost-benchmarking analysis, to develop a strategy, including a roadmap, to expand private pension coverage in Turkey. In addition, the team is drafting amendments to current legislation and regulations in an effort to support pension coverage that aligns with international standards and best practices and with the Turkish context. 

Expected Outcomes

The main expected outcomes of the project are as follows:
At the financial system level
    1.    Enhancing security of Turkey’s occupational and private pension systems by improving risk
           management (as measured by conformity with international pension standards)
    2.    Enhancing sustainability of occupational pension plans 
    3.    Enhancing efficiency of both occupational and private pension plans 
    4.    Increasing coverage of private pensions in Turkey
At the enabling environment level
    1.    Establishing legal and regulatory frameworks for risk-based supervision of occupational
           pension funds
    2.    Establishing risk-based supervision of occupational pension funds 
    3.    Increasing availability of cost-monitoring tools for supervisors of pension funds
    4.    Establishing legal and regulatory frameworks for expanding coverage of occupational pension
           funds