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Features that influence the exit decision from the private pension system in Turkey

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  • Kayam, Saime S.
  • Parkın, Mehmet Koray
  • Çeliktopuz, Merih

Abstract

Public pension system costs constitute a significant part of government expenses. Private pension systems have been developed as an alternative and/or as a complement to the public systems. In Turkey, the Private Pension System was given a head start in 2003. Although the system aims to provide supplementary income to the public pensions at retirement, observations reveal that many participants prefer to exit the system before retirement. The purpose of this study is to identify the characteristics of participants, who are more likely to exit earlier than retirement using the total population of contract buyers since the start of the system until 2011. The data is obtained from the Pension Monitor Center, and covers the customer and contract characteristics of more than 75% of all lapse types in the period. Impact of demographic factors and contract features are examined using the logit model. We divide the sample into different groups of customers according to their monthly contributions to the system. The results of econometric analysis reveal evidence of a significant relationship between exit decision and features such as education level,occupation, total accumulated savings, geographical regions, pension sales channel and payment instruments. Staying long enough in the system increases participants’continuity. Our elaborations also provide some tips for pension companies to ensure longevity and retirement of customers.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50933.

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Date of creation: 24 Oct 2013
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Handle: RePEc:pra:mprapa:50933

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Keywords: private pension system; exit decision; logit model; Turkey;

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  1. Sayan, Serdar & Kiraci, Arzdar, 2001. "Parametric pension reform with higher retirement ages: A computational investigation of alternatives for a pay-as-you-go-based pension system," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(6-7), pages 951-966, June.
  2. Serdar Sayan & Arzdar Kiraci, 2001. "Identification of parametric policy options for rehabilitating a pay-as-you-go based pension system: an optimization analysis for Turkey," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(2), pages 89-93.
  3. Smith, Sarah, 2006. "Persistency of pension contributions in the UK: evidence from the British Household Panel Survey," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 5(03), pages 257-274, November.
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  6. Whitehouse, Edward, 2006. "New indicators of 30 OECD countries' pension systems," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 5(03), pages 275-298, November.
  7. William E. Even & David A. Macpherson, 1994. "Gender Differences in Pensions," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 555-587.
  8. Barrientos, Armando, 1998. "Pension reform, personal pensions and gender differences in pension coverage," World Development, Elsevier, Elsevier, vol. 26(1), pages 125-137, January.
  9. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 1996. "The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers," Working Papers, Stanford University, Department of Economics 96011, Stanford University, Department of Economics.
  10. Richard A. Ippolito, 1994. "Pensions and Indenture Premia," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 795-812.
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