Turkish pensions increase falls short of expectations

• Labour minister hails increase
• More than 15% rise in payments
• Inflation expected to rise 21%

Turkey has increased payments on pensions, but observers say the latest rise does not keep up with the cost of living. 

On January 7 Vedat Isıkhan, the labour minister, announced that the minimum monthly state pension would be increased by 15.75 percent, taking the base rate payment to TL14,469 ($409).

A second increase, forecast to be around the same level as the January hike, is scheduled for the end of June this year. This would bring the rate of pension growth in line with that of the minimum wage, which was increased by 30 percent as of January 1 to TL22,104. 

In the last pension increase, which came into effect last July, payments rose by 25 percent to TL12,500, at the time $377 a month, though with depreciation this dropped to less than $360 by December, while year-end inflation of 44 percent also eroded retirees’ purchasing power.

Almost 20 percent of the population are pensioners. It is estimated that about 4 million out of Turkey’s 16 million pensioners are on the minimum payment rate, with retired state employees and those who made higher contributions to their own retirement fund being on a marginally improved scale of pension. 

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However, pensions for retired state employees were increased by just 11.5 percent in this round, narrowing the gap between those on the standard base rate and those receiving higher levels of payment. 

With inflation forecast by the government to rise by 21 percent this year, the labour minister said the welfare of pensioners, and those on the minimum wage, would improve. 

“With inflation being brought under control, there will be an easing in the market and a balance will be established in pricing, which will be felt in the pockets of our citizens,” Işıkhan said.

Not all agree with the minister, however. 

The latest pension ruling only added to the problems faced by those on a fixed income, İsmail Tutoğlu, spokesperson for the not-for-profit lobby group the All Pensioners’ Solidarity Network, told AGBI. 

“In terms of pensioners this is the most difficult time they have experienced in the history of the Turkish republic,” he said. “Just as a large segment of society now is doomed to live below the minimum wage, pensioners are doomed to live below the hunger threshold.”

The falling value of pensions will have a direct impact on the wider economy, Tutoğlu said, as a drop in spending power will cause demand and therefore production to fall, with fewer new businesses opening and also result in state revenue needed to fund the social security system to dwindle. 

“The policy position that if pensioners were paid more this would boost inflation is not true. The key element is that by increasing purchasing power you boost production as well,” he said.