PM weaves safety net for savers aged 57 and up
Critics say the plan will be impossible to implement.
The safety net for Israel's bruised pension savers is vaguely taking shape, after being pushed through by Prime Minister Ehud Olmert last night in a meeting with the country's economic leaders. Although Finance Minister Roni Bar-On is on board, it seems that some of his officials are less than enthusiastic: The program was accepted because of political pressure, not merit, they complained.
The "safety net" will provide only partial protection for savings. It will, however, apply to people aged 57 and older, which is a younger age than originally envisioned.
"I thought that a team of professionals should be tasked with preparing the correct pension protection plan, which ultimately aims to protect the citizens of the State of Israel, those who saved up for a long time," Olmert said during a press conference held at his Jerusalem office. "This is the money they set aside for their retirement, and we can't abandon them."
The more savers have in pension savings to begin with, the lower the amount the government will protect. For example, according to the rough outline agreed upon by Israel's leaders, if a person saved up to NIS 1.25 million, then up to NIS 700,000 will be insured. But if the savings are in the range of NIS 1.25 million to NIS 1.5 million, then the protected portion falls to NIS 600,000.
The rough guidelines of the plan were agreed upon last night after a meeting between Olmert, Roni Bar-On and Zvi Eckstein, the deputy governor of the Bank of Israel. Also participating in last night's safety-net summit were treasury director-general Yarom Ariav, Ra'anan Dinur, the director general of the Prime Minister's Office, and Manuel Trajtenberg, the chairman of the National Economic Council.
Never mind the stated intentions at this stage: Obtaining the assistance of the state won't be trivial. Olmert may have stated that he wants the plan "instituted immediately," but any saver wanting safety-net assistance will have to file a report on the state of his pension savings, because Israel has no central database on such long-term financial vehicles.
The government will have to set up a special mechanism to check eligibility for safety-net assistance. In other words, expect long delays and difficulty in execution.
"Public opinion, and especially the public's state of mind, which has been significantly affected by the tempestuous political times we are currently facing, prompted the treasury to provide a solution, the safety net," Bar-On stated last night.
However, the professional echelon over at the Finance Ministry was less than thrilled with the proposal, complaining that the outcome is clumsy and will be hard to execute. They also complained that it addresses the symptoms, but not the underlying disease.
Israel would be better off adopting the Chilean model, suggested some ministry officials: When a saver approaches retirement age, his or her savings are rerouted to safer investment avenues.
Bar-On told the press last night that the last remaining point of dispute to be resolved in discussion by cabinet is when the safety net should commence: "The treasury feels that the time has not come yet," he said. "There is no urgency."
Neither the finance minister nor any of the other officials would detail how much the plan is expected to cost. Trajtenberg said only that the cost would be "reasonable." However, in the absence of a central database on pension savings, no reliable answer could be given at this time, he explained.
Knesset Member Avishay Braverman promptly announced yesterday that the Knesset Finance Committee, which he chairs, will convene on Monday to discuss the safety net proposal, and also the Finance Ministry's completely separate plan to stimulate the economy.
The reason not to discuss it beforehand is that Id al-Adha, the Muslim feast of the sacrifice, takes place this week, during which time it is customary not to convene meetings at which important decisions are reached.
Also, the Meretz party is scheduled to hold a conference to determine its election slate on Sunday.
Despite criticism voiced in government circles regarding the limitations of the safety net, the expectation is that it will pass the Finance Committee with the help of opposition support, including from Likud members.
Braverman said he deserves credit for refusing to convene the Finance Committee to discuss the economic stimulus plan by itself: By virtue of that refusal, he says, the government decided on a safety net that goes beyond that envisioned by the Finance Ministry.