Reform for Turkish pension system urged amid inflation, early retirement, population aging

Amidst the high cost of living, a culture of early retirement, and a demographic outlook featuring population aging and a low birth rate, Türkiye’s pension system is under great pressure and requires urgent reforms, experts have said.

According to the state-managed Social Security Institution (SGK), some 16.4 million people receive retirement and old-age pensions in Türkiye, a country with a population of over 85 million.

However, as data from Türkiye’s Retirees Association showed, about one-fourth of all those retirees continue to work because they cannot make ends meet due to the high cost of living.

“Many retirees are compelled to work due to economic hardships stemming from high inflation in our country,” Emin Tangoren, a representative for the association, told Xinhua.

Economic woes have strained most retirees, forcing them to survive on insufficient pensions. “A majority of people live below the poverty threshold,” Tangoren said.

Despite being eased after the government’s disinflation efforts, Türkiye’s annual inflation remains elevated, hovering around 50 percent, which has severely diminished the purchasing power of retirees, even though there have been periodic increases in pensions.

“I receive 15,000 liras a month (roughly 440 U.S. dollars), which are simply not enough to cover my expenses,” said 65-year-old Muhsin Akdamar, a former municipal worker in Ankara.

“Thankfully, we own our apartment, so we don’t have to worry about rent. But many retirees are not so fortunate,” Akdamar said, urging the government to improve retirees’ living conditions.

On top of inflation, Türkiye’s culture of early retirement has increased the burden on the welfare system.

Türkiye has long had an early retirement tradition, with many workers preferring to retire in their 40s or 50s. Later in September 1999, the Turkish government passed amendments to the social insurance law, stipulating a minimum retirement age of 58 for women and 60 for men.

However, in late December 2022, less than six months before the presidential election, the Turkish government eliminated the retirement age requirement. This change, allowing more than 2 million workers to retire immediately, has further strained the pension system facing recurring financial deficits.

“When people retire in their 40s or 50s, they end up receiving pensions for a longer period than they worked,” Tangoren said.

Türkiye’s expanding aging population and decreasing birth rate are also major issues for the pension system, as there will be fewer working-age individuals to support retirees.

Statistics released in March by the Turkish Statistical Institute (TurkStat) showed that the elderly population aged 65 and above surpassed 8 million in 2023, increasing by 21.4 percent from 2018, while the proportion of the elderly population in the total population rose from 8.8 percent in 2018 to 10.2 percent in 2023.

Data released in July by TurkStat showed that Türkiye’s total fertility rate — the number of children per woman — fell to 1.51 in 2023 from 2.10 in 2014.

Besides, a report published by the Organization for Economic Cooperation and Development in December 2023 showed that informal employment makes up about 29 percent of the entire workforce in Türkiye, which does not contribute to the pension system.

“This demographic outlook creates significant challenges for the already savings-deficient economy,” Atilla Yesilada, an Istanbul-based economist, told Xinhua.

Current contribution rates may not be adequate to cover future pension payments, especially as the life expectancy of pensioners increases, Yesilada said.

“This creates a funding gap, putting additional pressure on the system,” he warned, calling for measures to ensure the system’s viability.

Bunyamin Esen, a labor inspector and former high-level official at the SGK, said that Türkiye’s retirement system “urgently needs reforms for sustainability and high-quality service for the nation’s benefit.”

“Türkiye may have 20 million pensioners by 2030,” Esen said in a recent op-ed published in the Turkish newspaper Daily Sabah.

“Addressing these challenges will require comprehensive reform, including measures to extend working lives, boost contributions, and reduce the system’s reliance on state support,” Esen noted.

 

 

 

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