The Real Revolution in Knesset

The election results show: it's a revolution. A civilian revolution. For the first time in the Knesset, a party with a purely civilian, "normal" agenda has won seats.

The Pensioners Party charged past the threshold to gain not two but seven seats in the Knesset. It had tried before but not made it. This is a party with no public agenda regarding security situation; which has nothing to say about Israel's macroeconomic situation; it is not thrusting itself Samson-style into the gap between the secular and religious. It will be joining the Knesset by virtue of one issue: pensioners' rights.

And we can all breathe a sigh of relief. Finally Israel is showing signs of normalcy. Finally citizens in Israel are placing their own well-being above that of their country and the state of the Arab-Israeli conflict. Finally Israel is turning into just another country, and who knows, maybe it will be run like just another country, which aspire first and foremost to improve the welfare of their residents.

Why did they get into the Knesset now? Now that there is broad agreement on how to handle the Israeli-Palestinian dispute, that as a grounds for voting has become less important. Yet the welfare cuts for the aged  (which have been largely reinstated) have made pensioners' rights a burning issue. Not only has Israel's pension system been reformed, but the population is aging. Increasing swathes of the population are concerned about their livelihood in their dotage.

Indeed, that is a knotty problem. According to the Central Bureau of Statistics, a pre-retirement couple lives on an average of NIS 9,357 a month. After retirement their spending drops to NIS 6,656 on average each month. The stats bureau has no explanation for the drop by a third. Perhaps old people need less; but one would expect people to want to maintain the same standard of living, not to spend less.

One has to conclude that the drop in spending is forced, not voluntary. People don't save enough for their pensions and have to lower their living standards.

Pensions is an urgent national issue, and it became all the more acute after the pension reform, which shifted the responsibility to the savers. How can savers be helped to assure a life of dignity in old age? That's the question that the Pensioners Party will have to address. Several answers come to mind.

Mandatory pensions may help the lower classes. That is one idea. Teaching people to save, by increasing the benefits conferred on pension savings, is another. In the immediate run, the Pensioners Party could push to stop benefits on pension savings among the highest earners. Money saved could be used to increase pension benefits for lower earners.

There is another important solution that the Pensioners Party could support, which originates at the Finance Ministry's insurance commissioner's office. During 2005, insurance companies charged NIS 1.3 billion in management fees on life insurance policies they manage. That is a cool 2.4% of their assets under management, and four (!) times higher than management fees charged by provident funds owned by the banks.

The high management fees flatten the returns to savers relative to provident fund returns.

High management fees have impaired savings for pension via life insurance policies. They have hurt your future pension. Why would you let that happen? Only because you have no choice; because you are the captive of the insurance companies. Because the Finance Ministry doesn't let people in life insurance policies to take their money somewhere else, to a cheaper manager. Pensioners Party - release the captives. Let pension savers protect their capital.