Improvement of Private Pension System in Turkey and Measurement of Its Efficiency with DEA

The aim of this study is to analyze improvement of private pension system in Turkey in numerical quantities according to years and measure efficiency of system. Data envelopment analysis (DEA) was used as measurement method in the study. Inputs of DEA model are the number of employees and total assets. Total quantity of total premiums and funds is the output of model. The study is original since it differentiates pension companies as large-small scaled and domestic-foreign ones and enables more detailed analysis about efficiency. When analysis results are considered, it was observed that efficiency level in system had normal course with slight changes in the last 6 years. It was also concluded that large-scaled company group had lower efficiency than small-scaled company group and domestic companies had lower efficiency than foreign companies. The main reason of inefficiency was their inability to operate in optimal scale due to financial crisis.


Introduction
The weight of private pension system (PPS) within financial sector increases and therefore it has become quite important for private pension companies which are the actors of system to be managed well and use their resource efficiently.According to OECD statistics, pension fund assets all over the world are USD 20.1 trillion in 2011.The OECD weighted average asset-to-gross domestic product (GDP) ratio for pension funds reached 72.4% of GDP in 2011, with the Netherlands achieving the largest ratio in 2011, at 138%.The importance of private pension systems can also be gauged by looking at the market value of assets accumulated relative to the size of the economy.The larger the value of their investments, the greater will be their ability to provide high benefits to individuals.In 2011, in relation to the national economy only three OECD countries achieved asset-to-GDP ratios higher than 100%-the Netherlands (138%), Iceland (129%) and Switzerland (111%).Considering generally, the average share of PPS within GDP in OECD countries is around 50% (OECD, 2012).Thus, both the total net asset value of fund and their share within GDP show it clearly that PPS is quite important in the sense of economies.
Due to this importance, efficiency measurement of PPS and private pension companies in Turkey constitute the scope of this study.Efficiency measurement which is the scope of study was carried out with DEA method.In literature, DEA method is frequently used in studies where efficiency measurement of financial sector is done.However these studies are rather related with efficiency of banks and there are restricted number of studies about private pension companies.
In addition, there are some studies researching efficiency of private pension companies in literature by using DEA.For example, Barrientos & Boussofiane (2005), analyzed efficiency of private pension companies in Chile.In Figure 5 to years.A this, if the lower than were 80% approxima small-scale between co level in 20 year 2004.
DEA determines relative efficiency of each unit by using observed inputs and outputs and calculating the rate of weighted outputs to weighted inputs.The most important reason in obtaining success in DEA is its being goal-oriented technique.This goal is to evaluate performances of decision units (Başkaya & Akar, 2005).

Results
Findings obtained in the study are given in two titles.The first one is basic statistical properties of input and output variables used in the study, the second one are the findings obtained as a result of DEA.

Basic Properties of Variables and Correlation Coefficient
Before calculation of DEA, it is beneficial to analyze compatibility of input and output variables used in the study.Averages of variables and binary correlation coefficients are given in Table 2.According to table, average size of assets of pension companies sector is around 8 Billion TRY and premiums collected are 952 Million TRY.The number of employers working in the sector is 6,680 people and the number of contracts is 367,292.It is seen in Table 2 that correlation of input and output variables are respectively 0.31 and 0.40.Correlation coefficients are positive and statistically significant.Moreover, it is also seen that correlation between input variables and output variables is positive and statistically significant.Therefore it is concluded that these four variables are in positive interaction with each other.In the light of these findings it can be said that correlation coefficients have acceptable quality in the sense of using input and output variables in DEA.

Findings of Data Envelopment Analysis
Here efficiency of private pension companies was calculated from 2004 to 2011 under the assumptions of both constant returns to scale (CRS) and variable returns to scale (VRS).In Figure 7 When the company a efficient co apart from compensat decreased.
As it was m foreign co are includ large ore of ng to calculations, small-scaled companies have higher efficiency compared to large-scaled companies.It can be said that inefficiency within sector after 2006 results from large-scaled companies and the most important reason of this global financial crisis.In this way, there was more increase of idle capacity in the input of large-scaled companies.This results from the fact that large-scaled companies adapt late to external changes compared to small-scaled companies.
Another result of the study is that the number of active companies in the system was at lowest level in 2005 and increased continuously until 2011.Similarly; when the efficiency of system is analyzed according to years, CRS and VRS efficiency of PPS were at the lowest level in 2005 and then increased rapidly in the following years.The efficiency of system was in horizontal progress from 2006 and was around the level of 0.80.
Effective management of PPS in Turkey is not only important for the partners, managers and participants of pension companies but also for creditors, state, financial and real sector which are the other stakeholders therefore for the whole economy.Resources brought together with the system are both an element of savings and financial resource of investments.In this property, it is compulsory to measure efficiency of companies and take measurements which increase efficiency for the development of country.Therefore, authorities as decision takers within and outside firms should take measures in order to operate in optimal scale and to transform production factor effectively into production.
Finally, as a suggestion, next researches can analyze efficiency of private pension companies in Turkey by using DEA. Figure

Figure 6 .
Figure 6.CRS and VRS efficiency of sector according to years

Table 2 .
Average of input and output variables and correlation coefficients *and ** show 5% and 1% significance level respectively.