A draft law submitted yesterday would impose restrictions on the commission and management fees charged on pensions, provident funds, executive insurance policies, and other long-term savings vehicles.
The bill, an amendment to the Supervision of Financial Services Law, was introduced by MKs Haim Katz (Likud), Shelly Yachimovich (Labor) and Ilan Ghilon (New Movement-Meretz). TheMarker recently reported on the high fees paid on savings that serve as retirement accounts.
The amendment addresses each saving instrument separately and sets fee ceilings for each. It proposes limiting management fees for new "makif" comprehensive pension funds (which are subsidized by government bonds) to 3.5% of the premium plus 0.2% of the accumulated balance, compared with the current fee ceiling of 6% and 0.5%, respectively.
The bill's backers note that this represents a 35% reduction in management fees when compared with the current average of 4.5% and 0.4%, respectively.
Fess for managing new general pension funds, provident funds and continuing education (hishtalmut) funds would be limited to 0.7% of the balance. The maximum is currently set at 2%, while the average fee is 1.4% of the total balance. Katz, Yachimovich and Ghilon say their bill would cut these fees in half.
"There's no doubt that the thorough and comprehensive investigation carried out recently by TheMarker accelerated the development of the bill," Yachimovich said. "We dealt with it a lot in the past but didn't feel that we had support for it and we didn't reach an agreement with the cabinet. Now we are hoping that the broad media coverage of the subject will cause the cabinet to realize that this matter must be taken care of urgently."
The legislators took pains to stress that they consulted with experts in order to come up with the numbers, but refused to disclose the exact formulas they used in setting the maximum fee rates.
The sponsors are braced for aggressive lobbying by insurance companies and agents and the funds themselves. "It's clear that there will be heavy pressure from the entities running the funds; after all, they know that when the amendment passes their treasure chest will be reduced," Yachimovich said.
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