The cost of the safety net proposed by the Histadrut labor federation for pension savings in provident funds and insurance policies of savers over 55 could reach NIS 14 billion. In the short term, about five years, the cost could reach NIS 4 billion to NIS 5 billion. Nevertheless, the Histadrut estimates that the plan's actual cost will be far lower - based on reduced management fees, among other things.
The safety net also includes members of new pension funds, but these account for only a few thousand people. It does not, however, include members of old funds that are assured by the state. According to the Histadrut's proposal, the state will assure that every pension saver over 55 recoups losses from 2008. This means the state will ensure the value of their pension as it stood on December 31, 2007, before losses averaging 20%.
To benefit, savers between 55 and 63 will have to continue to deposit savings in the funds until they retire at 67 - another four to 12 years. The Histadrut is banking on the economy recovering in the interim, by the time pension payments kick in (an average of eight years). With the losses recovered, there would be no need for the safety net.
Under the Histadrut plan, savers 64 and over would have to continue to make deposits and not withdraw them for a period of three years. In this more limited period of time there is a greater risk that the economy will not have recovered sufficiently to recoup losses accumulated in 2008 during the global financial crisis .
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