The importance of individual retirement system in Türkiye in terms of social security and comparison with OECD countries

The financial challenges facing social security systems have worsened, particularly due to the aging population and populist policies, leading to the widespread adoption of the private pension system (BES) as a complementary solution. To alleviate these problems, the retirement age has been raised, premium days and amounts have been increased, and pensions have been reduced. However, these measures have only offered temporary solutions to the financial problems. To address the flaws in the existing public pension system, private pension systems have been adopted and implemented in Europe and Turkey as a solution. These reforms first aimed to strengthen the public pension system and then to develop a complementary private pension system. Purpose of the system: To increase the level of welfare by providing additional income during retirement by directing the retirement savings of individuals to investment, to create long-term resources for the economy, to increase employment and to contribute to economic development. Private pension funds are important institutions providing long-term funds as institutional investors in developed and some developing countries. They are seen as an effective tool in alleviating the problems of the social security system. They encourage participants to save long-term and contribute to increasing their retirement income. Contributions made by participants are converted into investments by pension companies, providing resources for the national economy. This study examines the problems experienced in the social security system, such as unregistered employment, rising old-age rates and early retirement, the growing retiree-employee imbalance, rising healthcare costs, and insufficient premium collection, to mitigate the negative impacts on the Turkish economy. To this end, we aimed to increase the recognition and membership of the Private Pension System (BES), and to compare its performance with countries in the Organization for Economic Co-operation and Development (OECD). This study examines the importance of the Private Pension System (BES) implemented in Turkey in terms of social security and compares various percentage data with OECD countries between 2013 and 2023, including the ratio of active members in pension plans, the percentage of contributions made to pension plans as a percentage of GDP, the size of the BES fund and the ratio of the BES fund size to GDP, and the nominal and real rates of return on pension plans between 2013 and 2022. Data analysis was conducted from the OECD, General Directorate of Security, and the Social Security Institution (SGK) for the period 2013 to 2023, using a documentary screening technique. This study investigates the causal relationship between pension funds and economic growth in 30 OECD countries, which are classified into three categories: low, medium, and high, based on the size of their pension funds. Pension fund sizes for 30 OECD countries were evaluated in three categories, from smallest to largest, based on the averages for the period 2001-2023. The study examined the causal relationship between GDP and Pension series. Three panels were created within the three categories for this relationship, and the Bootstrap Panel Granger Causality test recommended in Konya (2006) was applied to these three panels. The analysis results for three different PPS density groups reveal varying degrees of causality between PPS and economic growth across countries. In countries with low PPS density, causality is generally unidirectional, running primarily from PPS to growth, while in countries with medium PPS density, this relationship is often bidirectional and interactive. This suggests that the system both feeds off growth and contributes to it. Keywords: Social Security, Retirement, Private Retirement System