How will auto-enrolment work?
How auto-enrolment typically works is that you are enrolled, as the word says it,
and then for a period, it starts to collect and to save. Typically, these amounts are taken from the salary. They are not very large but they can grow in time. In practice, without noticing, without even having received less money you’re saving every month. Why do you think that auto-enrolment is good for Turkey?
Let me say, that I think auto-enrolment is not just good for Turkey. Auto-enrolment, in my view, is good for many people across the world and it comes, actually, from the crossroads of economic science and psychological science. For a long time in economy, we were taught to be completely rational but let’s look around us, at ourselves and our family.
We take a lot of emotional decisions everyday and sometimes we know something is good for us but we do not really do it because we postpone. This may be eating healthy food, this may be going to the gym, and this may be saving for retirement.
When you ask people, everybody knows saving for later is good for them because they will need money when they are older, yet many people around the world postpone it to another day. I think Turkey is no exception. Many people in Turkey know that, with families getting smaller and smaller, they cannot depend on their children later. They have to save for their old age. Those same people are postponing it because they have urgent needs to pay the bills now. As a result, they may never save.
Why I think auto-enrolment is great for Turkey and is great for all of us? Because you do not have to take an effort and put some energy into entering a pension.
As a matter of fact, you are enrolled automatically, you got the pension. You have to take an effort to get out of it. It sounds like the same thing but research has shown; at practice, experiments, in many countries across the world, when people are first enrolled and then have to make an effort to get out, most of them stay. Why is it good for Turkey? I think it will help many people in Turkey to save for their retirement.
Many people say ‘’we want to get out, can we get out?’’
Yes and Turkish government is offering everybody an exit window according to the latest proposed law of two months but there will be a welcome bonus of a 1000.-TL for those who stay. I believe that is a very strong gesture from the Turkish state and a very attractive offer for anyone saving for retirement.
Even though it says auto-enrolment, for some people it sounds like it is more like forcible system. What do you think about that?
I know, when you read reactions in the paper, when you talk to people, nobody likes to be pushed, and nobody likes to be obliged to do something. Therefore, there is a kind of natural resistance.
However, at the same time, many people know that it is actually in their best interest, it is good for them.
The only issue we have to manage really well, is that people may not fully trust the system. Because when they trust it, they may stay. When there is no trust, people leave. So, trust is something that we all need to keep an eye on.
Do you think people do not trust the system or the companies? In this case, which one needs to improve its trustworthiness?
When I talk to people in the street, this is something we all need to focus on and as NN, we are very interested in the general attitude of trust and also finding out what we can do, if necessary, to improve it.
Are you ready for it as NN?
Are we ready for it as NN? NN is offering second pillar pension contracts in many of the markets. We take leading positions in many European countries and we are specialized in life and pensions. We know this business.
Absolutely we are ready.
We have a very strong and stable balance sheet, which is important for retirees because if you save for a long time with a company, you want that company to be stable and enduring. With NN, people can be comfortable because of the strictest rules, possibly NN is one of the most strong and solvent companies.
We are very pleased with our fund performance in Turkey. We are getting recognition for this – our funds have outstanding long-term performance. We are helping our customers day in and day out with our experts to get the most out of their savings because in the end, that’s something clients really want.
They want to see their savings grow.
With NN, your savings grow faster than the other companies in Turkey. In addition, we are innovating to follow the preferences of our clients. We know that Turkey has a very high usage of smartphones and we know that many people in Turkey today do their bank business over the phone. We are one of very few pension companies also allowing access to their pension contract on the smartphone. People can make all the changes they may want to make on their phone.
Lastly, we know that saving for your retirement is an effort because you have to postpone the fruits from your money that you earned until after retirement, that is very tough, we all know that.
Therefore, it is the best practice that you do not only give something after ten years but also you give some joy now. For that, we have created "Önce Sen Dünyası” which offers many benefits to clients as soon as they start saving.
So, NN has been making a lot of investments to serve pension customers in Turkey and I think we’re ready for auto-enrolment.