The Turkish Parliament enacted Law No 4632 on Individual Private Pension and Investment Systems on April 7 2001, and this came into effect on October 8 2001, paving the way for the establishment and operation of pension companies and investment funds, individual private pension systems and individual private pension intermediaries.
Foreign or Turkish entities can now establish pension companies only in the form of a joint stock corporation, with a share capital of at least TL20 trillion ($12.2 million). Existing insurance companies authorized to execute life and health insurance policies can convert their companies to pension companies within five years from the effective date of the law. Although they may continue executing life insurance agreements and policies, health insurance portfolios must be transferred to third parties within two years from obtaining a pension licence.
Both newly-established pension companies and insurance companies converting into pension companies must obtain an establishment licence and operation licence from the Undersecretariat of the Treasury. Furthermore, the Capital Market Board must approve the fund's internal by-laws, since the nature and operation of the funds are subject to the Board's legislation. Finally, the pension company must set up at least three investment funds with different portfolio arrangements consisting of various capital market instruments listed in the relevant legislation. The pension investment funds do not have a legal personality separate from the relevant pension company.
The founders of pension companies must not possess, directly or indirectly, more than a 10% shareholding in money brokerage houses, banks, insurance companies and other companies that operate in money and capital markets, and which are under liquidation. Furthermore, at least 51% of the capital stock must belong to shareholders, and these must be legal entities. The Treasury must approve transfer of share or voting right transactions, establishment of share pledges with certain percentage limits or share subscriptions regarding the establishment or removal of share pledges. Finally, certain tax incentives have been granted that exclude earnings from withholding tax and a certain percentage from corporate tax, and the income generated from individual pension funds is exempt from the banking and insurance transaction tax.