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02October2015

Annual Income Insurance

Government's support to promote the Individual Pension System (IPS/BES) has recently received a high level of attention. The greatest factor that effects the achievement of the provider entities regarding their goals on IPS, is mainly due to the society being unwilling to feel the burden of a concern for their future, the people desiring to make their living in the future through a fixed level of income or their needs of a raise on retirement salaries, which is insufficient in current conditions. The success of IPS/BES has served as another tool for other saving opportunities to enter in our lives.

The Treasury Secreteriat's Annual Income Insurance Regulation, which was published on 01.04.2015 has entered into effect as of 01.10.2015. Annual Income Insurance indicates the regular payments made to the insurants or their beneficiaries for a certain time or a lifetime. This insurance payment starts either immediately or after a certain time period, depending on the contributions being made as accumulated and in single payment or on a periodic basis. Upon the purhcase of the Annual Income Insurance Contract; the person can be entitled to an income for his/her lifetime or for a time period to be specified, amounting to the whole or a part of the person's net saving amount in his/her personal pension account after taxes.

With the purchase of Annual Income Insurance Contract, the determined retrement salary can be paid on a quarterly, semi-annual or annual basis. For people under the age of 56, the product can be offered, from which the insurant or upon the insurant's death – the beneficiary can benefit, depending on the premiums paid at certain amounts or at amounts indexed to an asset or a group of assets including CPI (Consumer Price Index). In accordance with the insurant's decision, the beneficiary can benefit from a long service death benefit or a definite term or lifetime duration of monthly payments. Additionally, the distribution of dividents can also be counted amoung the promised benefits.

Annual Income Insurance can be purchased from the pension company, where your personal pension account lies as well as from a different provider, offering different prices and options. In the competitive market, more products will be available, which offer higher level of retirement salary for the same amount of savings under the unchanged conditions.

In accodance with the data obtained from the Pension Monitoring Center, there is a savings level of approximately 39 billion 408 million TRL within the scope of IPS/BES, deposited by almost 5 million 725 thousand contributors. According to this data, the percentage of the contributors under the age of 56 is 93,5%. In conclusion, Annual Income Insurance will be an important benefit for the people, who desire to have a higher level of earnings.

Written by Selma Kıy, Posted in Social Security Law and Legislation, Taxation Law

About The Author

Selma Kıy

CPA, Managing Partner
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