Privatization of social security and its practicability in Turkey

The most controversial issue in the world, since the last quarter of 20* century, has been the financial crisis of social security systems. The main reason of the crisis is the financial deficits in retirement systems. Retirement deficits in developed countries are the result of both the extension of life duration of individuals and the increased health expenses. In developing countries, however, the main reasons of retirement deficits are political interventions such as, decrease in age of retirement, usage of retirement funds for public, and bad payments. Financial crisis in social security systems, before all else, is tried to be solved by parametric reforms. These parametric reforms, however, are not sufficient so that systematic reforms are employed. Privatization of social security is a systematic reform in which a privately managed retirement plan is added into retirement systems. Privatization, especially, is currently used by developing countries. Developed countries passed this process after the World War II by including occupational pension plans to the system. Privatization has several types. While some countries, such as Chile, Bolivia, Mexico, execute individual retirement plan to repeal public retirement plan, some other countries, such as Argentina, Hungary, Poland, use individual retirement plans to complement public retirement plan. Many developing countries, individuals are obliged to join individual retirement plan but some developing countries leave it to their own free will. Privatization is done to get higher return from pension funds under competition. However, for developing countries, participation and accumulation of fund are the crucial elements. Therefore, in order to mention about privatization, mandatory participation is inevitable. In our country, the success of individual retirement system has not been definite, yet. Because participation of the system is not mandatory and individuals do not have any possibilities to draw accumulated funds. In our study, this and similar matters have been taken into account and in order to be an effective system some suggestions have been given.