Page 15 - Turkinsurance Digital Magazine

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By the end of the first year of auto-enrollment, rate of continuity ommended the regulators that the continuity of 25 percent state
was 40 percent, number of participants who decided to stay in the contribution funds is a critical success factor, and that employees
system to save for retirement was 3.5 million, and total fund size should be able to collateralize their funds in the system for loan
was 1.8 billion TL. Workplaces with 50 to 99 employees joined applications in order to prevent or minimize the opt outs due to
the system as of January 2018, and offices with 10 to 49 employ- financial needs. On the other hand, we believe that making an
ees joined as of July 2018. analysis solely focusing on the opt - out rates will do injustice
to the gains of auto-enrollment. Opt - out rates are very similar
With the auto-enrollment system, 106 thousand private compa- to each other in every phase, which remains around 50 percent.
nies and public institutions were included in the pension system by Average rate of opt – out for all phases is 52 percent. Employees
the end of June 2018. At the end of August, 5,2 million employ- should stay in the system for long term, and enhancing continuity
ees continues to stay in the system, which has reached a fund size rates is of vital importance to increase both individual and nation-
of 3.6 billion TL. Despite the high withdrawal rates, auto-enroll- al savings. But we must underline that over 5 million employees
ment system increased the number of people saving in BES up to participated in the system in less than 2 years, which is a very sig-
12 million, which means that it has made a huge contribution to nificant gain for a system that was launched in a very short period
expand the system within general public. of time. As you may remember, the amendment on auto-enroll-
ment was approved by the Parliament in August 2016, and was
However, the fact that withdrawal rate has reached as high as launched as of January 2017. All preparations were completed
63 percent in auto-enrollment signals to the basic deficiencies in within only 4 months. We did not have enough time to explain
system’s design. The system needs a radical revision; and we have and communicate the new system to the public. We see that other
shared our recommendations with the regulatory authority in this countries were successful in auto-enrollment after both employ-
respect. We expect new amendments to the auto-enrollment sys- ers and employees were educated about the system along a long
tem during the new structuring process. period of preparation; they put particular emphasis on promotion
and communication of the system.
Opt –out rates in auto-enrollment were especially striking in
its initial phase. We know that the Association conducted a Another significant factor is employer’s contribution. In those
research on this topic. How do you evaluate the results of countries where auto enrolment systems are deemed to be suc-
your research? cesful, we see that they enforce employers make matching con-
tributions into their employees auto enrollment accounts. And
As a result of our research, we have seen that the most famous naturally, this affects continuity rates positively. We have shared
characteristic of the system was the state-contribution funds our policy suggestions regarding the introduction of employers’
equaling 25 percent of participants’ contributions. We also found contribution with the regulatory authority. Our suggestion in-
out that financial requirements of employees constituted the cludes the transfer of a part of severance pay or unemployment
number one reason for them to opt-out. That’s why we have rec- fund to auto-enrollment, without creating an extra labor cost for