“Our plan is to grow organically this year,” de Vries told the Hürriyet Daily News & Economic Review on Tuesday, adding that the firm started issuing life-insurance policies last month and also has plans to launch accident policies.

ING Group acquired the private-pension business from the Turkish Armed Forces Pension Fund, or OYAK, in the summer of 2008, and changed its name to ING Emeklilik. Although ING Emeklilik hopes to expand, de Vries said, it will not do so by acquiring other businesses, at least not in the near future.

“When I arrived in Turkey in February, I discussed with a few investment bankers if we should expand by another acquisition later. But we came to the conclusion that buying would have become much more costly than growing the business by focusing on service and fund performance,” de Vries said.

Potential for 23 million customers

Before joining ING Emeklilik in Turkey, de Vries led ING’s private-pension business in Moscow. Prior to that position, he worked for ING’s pension-insurance companies in Romania, Canada, Belgium and Spain.

“There is so much potential in Turkey’s pension sector. Because there are only 12 companies, there is still very little competition. Only 2 million of the population of 73 million has pension insurance, which means a huge market potential,” de Vries said, adding that Turkey’s private-pensions system has the potential for around 23 million customers.

“In terms of the potential number of the private pension and insurance business, Turkey is much closer to Europe than Russia. People here are a bit more focused on the long term, and the tax system and regulatory environment a little bit more favorable,” de Vries said.

“Products are very transparent and this is good for clients and pension funds,” he added. “In fact, in this sector, Turkey is one of the best-organized industries in the world.”

‘Second pillar’ would erode grey economy

According to de Vries, the majority of private-pension insurance policies – called “third-pillar” plans – are currently privately owned. Group plans comprise only 25 percent of all policies sold, he said. Overall, the system relies primarily on retirement benefits provided by the state, or the “first pillar.” The “second pillar” – employer-sponsored pension plans – is absent.

The CEO added that the creation of the second pillar in Romania in the late 1990s helped to reduce what he called an “informal economy.”

“Romania used to have the same problem that Turkey still has – that some employers evade paying their employees’ social-security contributions. But when the second pillar was launched, scores of firms suddenly became registered only in a few weeks’ time,” he said. “The creation of the second pillar radically reduced the informal economy and helped ING bring some 2 million customers into its database within a very short period of time.”

De Vries expressed his hopes that the new government will tackle the issue after next year’s general elections. “[The] second pillar is always a bit of a political issue. I hope it will be on the agenda of the new government,” he said, also calling for better communication to citizens in Turkey about the tax benefits of private pension savings.

“In Turkey, two-thirds of the people who buy a pension plan do not know exactly what they are buying and what the tax advantages involved are,” he said. “Educating the public is something the government and industry should work together on.”

The CEO added that industry should direct its energy away from competing for existing clients and focus on drawing completely new entrants to the system. “The market here is so big that none of us really needs to worry about acquiring new customers or competition. At the same time I am surprised that in this small market of 12 players, companies are trying to conquer each others’ customers,” he said.

“This is not good for the firms themselves, and the regulator has also taken a negative stance on this,” he added. “But there are still firms that grow mainly through transfers from other firms. This is something the industry should stop.”