Emre Uludağ: The great pension heist: how the AKP government stole the lives, futures, and salaries of Türkiye’s retirees

The significant decline in pension amounts in Türkiye compared to the past is not a coincidence or merely a current inflation problem. This situation is the direct mathematical consequence of systematic legal changes made to the social security system in 1999 and especially in 2008 to balance public finances.

Three fundamental structural changes lie behind the current economic picture and the policies implemented.

Gradual Decrease in the Replacement Rate (Aylık Bağlama Oranı - ABO)

A pension is calculated by allocating a certain percentage of the earnings reported to the SGK (Social Security Institution) throughout a person's working life to the retiree. This percentage is called the Replacement Rate (ABO). Today, when calculating a retiree's pension, their working life is divided into three separate periods, and different, progressively decreasing rates are applied to each period.

Legal Period	Relevant Regulation	Average ABO (9000 Days / 25 Years)
Pre-1999	Indicator System	70% - 75%
Between 1999 - 2008	Law No. 4447	60% - 65%
Post-2008	Law No. 5510	50%

In the past, when a working person retired, they could receive approximately 75% of their average earnings as a pension. Today, someone whose entire working life has taken place after 2008 can only receive 50% of their earnings under the same conditions.

Slashing the Growth Share (Update Coefficient)

The "Update Coefficient" is used to adjust the premiums paid in past years to the economic conditions of the retirement day. This formula is calculated by adding the inflation rate and the country's economic growth rate.

Pre-2008: 100% of the country's economic growth rate was added to the update coefficient. This meant the retiree received a full share of the country's general welfare increase.
Post-2008: With Law No. 5510, the growth share was reduced to 30%. Thus, a 70% cut was made to the economic growth share reflected in pensions.

The Lower Limit of Pensions and the Collapse of the "Root Pension" (Kök Maaş)

Before 1999, the legal lower limits for pensions were around 70%, but with the 2008 regulation, this minimum protection shield was reduced to 35% (and in some cases even lower).

This is the primary reason why the "root pension" (kök maaş) amounts, which are frequently discussed by the public today, are so low. Because the actual pensions resulting from SGK's own formulas fall far below living standards, the government is forced to raise these figures with additional allowances transferred from the Treasury under the title of the "lowest pension."

Key Takeaway: Dividing the system into three different legislative periods systematically condemns the vast majority of the population, whose working time largely falls after 2008, to increasingly lower pensions with each passing day.

The Burden on the Treasury and the General Budget

The practice of closing the gap between the root pension and the legal lowest pension by the Treasury has altered the fundamental logic of the social security system in the Turkish economy and turned into a massive structural budget burden. While the SGK should normally pay pensions with the premiums it collects, the system has increasingly evolved into a structure financed by tax revenues.

The cost of this picture to the Treasury and macroeconomic balances can be summarized under four main headings.

Massive Growth in the Budget Deficit and Resource Transfer

The difference between the actual pension a retiree earns through the premiums they paid throughout their working life (root pension) and the legal minimum limit set by the government is paid directly from the Treasury, not from the Social Security Institution (SGK) vault.

For millions of retirees whose root pension remains below the minimum limit, the Treasury must make cash transfers of tens of billions of liras to the SGK from the general tax pool every month.
This massive and constantly increasing payment item is one of the biggest reasons for the structural growth of the central government's budget deficit.

Disruption of Premium Justice and Incentive for Informality

The Treasury's subsidization of salaries from the bottom, effectively equalizing millions of people at a single "lowest pension" level, severely damages faith in the fairness of the system.

When an employee who pays premiums based on the minimum wage and an employee who reports higher earnings (and pays more premiums into the system) receive the same or very similar pensions upon retirement, the motivation to pay high premiums is destroyed.
This situation paves the way for employers and employees to hide actual salaries (showing premium-based earnings at the minimum wage level) and further reduces the SGK's premium revenues.

Collapse of the Actuarial Balance (System Sustainability)

In a healthy retirement system, the premiums paid by active workers are expected to cover the pensions of passive retirees.

The rapidly declining "worker/retiree" (active/passive) ratio in Türkiye demonstrates that the system cannot survive without this massive subsidy from the Treasury.
The retirement system has ceased to be a self-sustaining structure and has turned into a patient constantly receiving life support from the outside (from the Treasury).

Development Constraint and Inflationary Pressure

Directing a massive portion of the taxes collected by the state to "current transfers" (salary differences) instead of investments slows down the country's economic growth potential.

Resources that should be allocated to education, technology, infrastructure, and production are inevitably diverted to close this gap.
In order to finance this deficit, the Treasury is forced to heavily rely on indirect taxes (VAT, SCT) or resort to borrowing; this, in turn, creates a vicious cycle that triggers upward inflationary pressure.

The great pension heist: how the AKP government stole the lives, futures, and salaries of Türkiye’s retirees