Inadequacy of domestic savings in Turkey limits the potential for sustainable growth in the long-term and exacerbates the vulnerabilities associated with dependency on volatile foreign capital flows. The private pension system that was designed to complement public pension system demonstrated limited impact on savings rates. Thus, former tax incentives are replaced by matching contributions as of 2013. Our paper aims to assess the effectiveness of the recent incentives introduced to the private pension system in Turkey. We find that the state contribution has positive significant effect on the number of participants by using alternative asset returns and a dummy variable for state contribution in two samples covering different time periods. We analyze the dynamic time varying interaction between the state contribution and the number of participants in our second sample that focus on post reform period. The model estimated with the dynamic Kalman filter indicates that the positive effect of the state contribution on the number of participants tends to decline slightly in time. We conclude that the fund management in the private pension system should be improved in order to make use of the state incentive efficiently. Copyright (C) 2017, Borsa Istanbul Anonim Sirketi. Production and hosting by Elsevier B.V.