The effects of private pension system in Turkey on the capital market

Although Turkey does not experience the problem of the population of the old as of now, in the future the whole world will be facing the older population issue. The countries who detect this problem beforehand have specifically abandoned the system of allocating retirement pensions in a progressive way because of the effects on the economical and social life and moved on to a transition period towards multi-layered models which complement the previous system. The private retirement pension system constitutes at least one of these many layers. Parallel to the reforms that are undertaken throughout the world, the retirement system in our country has also entered into the process of re-structuring in a multilayered fashion. The retirement system which has gained legal stature since April 2001 has started to accept memberships and proceed according to the principle of voluntary participation since October 2003. This system which aims to provide additional income to the participants in their retirement periods as a supplement to the social security system carries a great importance on participants, retirement firms, markets and the government for the success it will display in the long run. On the other hand with the effectuation of private pension funds, it will be possible to increase the national savings and economy with great amounts of investment through individual accounts in the long run. Consequently these investments will expand national investments, productivity and job opportunities which in turn will increase the economic growth. In addition to that, pension funds are important elements for income distribution, investment and savings functions as well. The development of private retirement pensions and other institutional investments has a vast effect over the capital market. But the effect of private retirement pensions on the capital market varies from one country to another. It is also very important to create investments with the funds that have been collected. Private pension funds represent the largest and fastest growing segment of the institutional capital. For this reason, it is necessary for our country to use this opportunity effectively and to provide all the required modifications for the system to proceed in a healthy manner by making use of the experiences and expertise of the other countries. In this research, the private retirement system which is an important step in the progress of the social security systems of the developed of developing countries will be viii examined in regard to the effects on the economy and capital of our country and will be explained by giving examples and cases from other countries comparatively.