TURKEY - Turkish private pension funds are close to TRY6bn (€3.29bn) in value while the system is likely to cover two million participants soon, Mehmet Simsek, Turkey's minister for economy has revealed.

Speaking at the first Istanbul International Insurance Conference yesterday, Simsek noted the current volume of assets in the private pensions system, which is nearly TRY6bn, is a healthy figure for Turkey.

"Perhaps these figures are not much in international comparison, but for Turkey they are important as the private pensions system was created only in 2003 so assets and membership base have since grown rapidly," he said.

The private pensions system of Turkey currently consists of 10 players, who have total assets of TRY5.75bn or €3bn.

Approximately 1.68 million of Turkey's 70.5 million residents hold private pensions delivered by insurers, and the largest share of these policies are based in Istanbul.

Private third pillar plans still dominate the country's pension landscape and form a 75% share of all plans.

"The social security system in Turkey is unfortunately deficient," noted Simsek, "and this is Turkey's biggest impediment.

"The gross domestic product of Turkey will be around $800bn this year. If our social security system were not deficient and if we had created the conditions much earlier for the insurance sector to operate … we could have social security assets of $800bn," Simsek suggested.

Turkey's annual social security deficit is estimated to total approximately 3% of its GDP.

Half of the local players in the pensions market are at present under total or partial foreign ownership and those most recently joining the ranks are Dutch insurer Aegon, which acquired Turkey's €38m Ankara Emeklilik private pension insurance firm in July.

That said, more foreign firms are expected to enter the market later this year, including ING, which is expected to acquire Oyak Emeklilik, the €174m private pensions arm of OYAK, the Turkish Military Pension Fund, by the end of this year.

Other players, including Finansbank, owned by the National Bank of Greece, and Ray Sigorta, owned by Vienna Insurance Group, are said thought to be considering a move into the Turkish private pensions sector.

"There is a need for more long-term institutional investors in Turkey and for a medium-to-long-term investor, Turkey is still very attractive," continued Simsek.

"Compared to the past and many other countries with similar economies, Turkey is in a more stable position today to handle the effects of the crisis in global markets," he added.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

Topics