The amount of the retirement pension is one of the most significant concerns for individuals who are eligible to receive an old-age pension after years of work. Therefore, many prospective retirees wonder which year would be more advantageous for retirement. The answer to this question is not explicitly stated in social security legislation, and calculations must be made separately for each year, considering the economic indicators of that year.
Methods of Calculating Retirement Pension
Retirement pensions for SSI (Social Security Institution) and BAĞ-KUR (Social Security Organization for Artisans and the Self-Employed) are calculated over three different periods:
- Partial Pension Before 2000: Calculated using the formula: Indicator x Coefficient x Monthly Binding Ratio.
- Partial Pension Between 2000 and September 2008 (Inclusive): Found by multiplying the amount increased by the update coefficient of average annual earnings with the monthly binding ratios. In this period, the update coefficient is reached by adding the growth rate to the increase rate in the CPI (Consumer Price Index).
- Partial Pension After October 2008 (Inclusive): In this period, the update coefficient and the monthly binding ratio of average annual earnings are used, but the update coefficient is determined by a different calculation.
Prior to the October 2008 period, the update coefficient was reached by the sum of the full increase rate in CPI and the growth rate. However, from the October 2008 period onward, the update coefficient is reached by summing the increase rate in CPI with 30% of the growth rate.
Pension Increase Applications
For insured individuals who apply for retirement during the year, the updated pension amount up to December of the previous year is used. The rates of increase made during the year up to the date of the allocation request are then applied. Pension increases are made in January and July.
Monthly Calculation for Insured Individuals Applying for Retirement in 2024
For applications made in 2024, the monthly pensions calculated using the 2023 update coefficient will also include the January and July 2024 salary increase rates.
Considering that the CPI for 2023 is 64.77% and the growth rate is 4.5%, the 2023 update coefficient will be calculated as 66.12% (64.77 + (4.5 * 0.30).
Pensions updated with this coefficient will be increased cumulatively by 86.15% in 2024, with a 49.25% increase in January and a 24.73% increase in July (1.4925 * 1.2473 = 1.8615). Additionally, the salary increase rate for January 2025 will be added to this.
Monthly Calculation for Insured Individuals Applying for Retirement in 2025
For those applying for retirement in 2025, the update coefficient up to December 2024 will be applied, and then the salary increase rate for January 2025 will be added. However, they will not benefit from the increases applied in 2024.
The 2024 update coefficient consists of the full CPI rate for 2024 plus 30% of the growth rate. Since 2024 has not ended yet, the CPI rate is not known, but an evaluation can be made based on official institutional data.
The Central Bank has raised its year-end inflation forecast for 2024 by 2 points to 38%. On the other hand, according to the "Market Participants Survey," which monitors the expectations of decision-makers and experts in the financial and real sectors through the Central Bank of the Republic of Turkey (CBRT), the year-end consumer inflation (CPI) expectation in July was 42.95%, and the GDP growth estimate was 3.4%.
Based on the Central Bank's inflation forecast and the growth results from the expectation survey, the update coefficient will be calculated as 39.02 (38 + 3.4 * 0.30).
If only the expectation survey results are considered for inflation and growth figures, the update coefficient will be calculated as 43.97 (42.95 + 3.4 * 0.30).
Taking the average of the Central Bank's inflation figure and the expectation survey results, the update coefficient will be calculated as 41.50 ((38 + 42.95) / 2 + (3.4 * 0.30)).
Salary Difference Between 2024 and 2025 in Türkiye
The positive or negative difference between the salary increase rate applied to retirement pensions in 2024 and the update coefficient will determine the advantageous year for retirement. If the update coefficient in 2024 is higher than the salary increase rate, then 2025 will be advantageous; otherwise, 2024 will be advantageous.
As detailed above, the update coefficient for 2024 is calculated to be significantly lower than the salary increases applied to pensions. Therefore, it is estimated that retirees in 2024 will receive approximately 34% more pension than those retiring in 2025 ((186.15 - 139.02) / 139.02).
For private sector workers, it is considered more advantageous to apply for retirement by December 31, 2024, and for public sector workers, by January 14, 2025, compared to retiring in 2025. Those who submit their retirement petitions by these dates will benefit from the 2024 salary increase rates and receive a higher pension.
Specific Situations
Workers who have been employed at the same workplace for many years and earn above the severance pay ceiling may consider it more advantageous to retire in 2024 rather than waiting for an increase in severance pay. They plan to apply for retirement in 2025 to receive severance pay based on the increased ceiling in that year.
For public sector workers, there is no risk in waiting until January 14, 2025, as the calendar period ends on that day. Public sector workers who submit their retirement petitions by January 14, 2025, will benefit from the salary increases of 2024 for pension calculations and will receive severance pay based on the 2025 ceiling amount.
For private sector workers, the calendar period ends on December 31, 2024. Therefore, they must submit their retirement petitions by this date. If they retire in 2025, their pensions are likely to be lower, as calculated above. Although the severance pay ceiling will increase in 2025, considering that the pension is paid monthly and will be received for many years, the increase in severance pay will not compensate for the decrease in the monthly pension.
For example, a private sector worker applying for retirement in 2024 will receive a pension of 32,000.00 TRY, while if they retire in 2025, they will receive approximately 21,440.00 TRY. The monthly loss will be 10,560.00 TRY.
Although the severance pay ceiling for 2025 is not yet known, considering inflation rates and civil servant salary increases, if the annual increase in severance pay in 2025 is approximately 10,000.00 TRY, even if the worker has a tenure of 10 years, the calculated 100,000.00 TRY increase in severance pay will only compensate for the pension loss for about 9.5 months. Therefore, we assess that waiting for an increase in the severance pay ceiling would be detrimental to the workers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.