TURKEY - Finance
General Manager, Vakıf Emeklilik
Mehmet Bostan was born in 1971 and graduated in International Relations from Istanbul University. He later obtained an MBA from Bilgi University. He began his career in business in 1995, working for several banks in Turkey. Between 2006 and 2009, he worked as Chief Representative of Turkey at Dresdner Bank AG. In 2009, he was appointed CFO of Güneş Sigorta, and in 2010 he became General Manager of Vakıf Emeklilik.
Turkey’s private pension system is in its infancy. It was initiated in 2003 with a comprehensive strategy. Since the 1980s, Turkey has spent a lot of time, money, and energy on economic, social, and political issues. The main reason was political instability and weak governments. In the early 2000s, after Turkey chose a strong government that has well-designed plans for the next decade, it became a better and more stable country. This comprehensive strategy included reforms on macro issues like tax, trade, social security, and banking, which were very important in particular. It was quite successful. Refinements in the pension system were part of this plan, and these provide a social benefit for citizens by increasing Turkey’s wealth. However, a successful government must provide a secure future for its people. The Turkish government now has the ability to provide a standard social security system to all of its labor force, but it can be insufficient sometimes, especially for people who live in cities and have higher living standards. In order to satisfy sufficient social standards, there is a need for a more complementary system. This is the main purpose and function of our industry; to complement the government’s social security system. Secondly, and more importantly, the private pension system provides a savings tool for Turkey. Through the last decade, government performance is said to be satisfactory when it comes to saving issues. The government is prosperous also in macroeconomic issues. For example, the budget deficit was 10.2% in 2002 and was expected to be 1.7% at the end of 2012. The debt-to-GDP ratio was 73.7% in 2002, and at the end of 2012 it was expected to be 36.5%. The government is saving responsibly, and even corporations are decent at saving. However, people individually are not good at saving. From one perspective, this is not a bad thing. Turkey has a young, dynamic population that is eager to spend because of increased economic stability and growing disposable incomes. Today, more Turkish people are travelling around the world, consuming luxury goods, buying more cars, and generally spending more. The private pension system is a financial tool that supports the government’s saving plan by increasing personal savings.
Vakıf Emeklilik was founded in 1991, and initially was established as a life insurance company. After 2003, we acquired a license for pensions, so now our company is able to service both life and pension needs. Today, we have the fifth largest fund out of 17 companies. In 2008, there were only 10 companies, now there are 17, some of which are very new and small. Vakıf Emeklilik is a subsidiary of VakıfBank, and we have 650 people working for the company. Our main headquarters is located in Istanbul and there are nine regional headquarters, three of which are in Istanbul. We are a finance and marketing company, and we have a large sales team that has a strong relationship with the bank. We have a large bancassurance branch, both in this company and in the bank.
If we want this industry to grow, we should attract as many corporations as possible. Turkey’s corporate fund rate is 3.8%. Vakıf Emeklilik has one of the largest corporate portfolios at 5%. We are now investing in our company and restructuring our corporate sales teams, while establishing a new team for special projects. We will work with some municipalities, large companies, and fast moving consumer goods (FMCG) companies. We want to create a more corporate business. This is important for the whole industry to grow, and also for the per-capita contribution rate.
We think that the 25% state contribution is very important; furthermore, it will encourage more contributions and increase the number of people entering the system. It will also increase the per-capita contribution. We believe this will create larger contributions from existing and new clients. Now, the industry’s total fund assets are aroundTL19 billion, and the projection of the Association of the Insurance and Reinsurance Companies of Turkey shows that it will reach TL400 billion by the beginning of 2020.