The Knesset Finance Committee approved the government's proposed safety net for provident savings and pension funds, even though most of the Knesset members say that the reimbursement mechanism is complicated and difficult to understand. The vote was almost unanimously in favor, with the exception of MK Haim Katz of Likud, who abstained. Government assistance to pension savers will apply to losses sustained from November 30, 2008.
The equation for calculating the reimbursement is based on accumulated loss in the relevant pension or provident fund and the Consumer Price Index. A number of committee members expressed concern that it will be difficult for pension savings owners, the beneficiaries of the safety net, to claim the benefits without assistance from hired professional consultants. In addition, reimbursement to fund members hinge on the creation of a database of persons entitled to the benefit and likely to result in a tangle of bureaucracy.
The committee was not presented with an estimate for the cost for the program, though according to some estimates recently voiced within the treasury, the cost could reach NIS 14 billion. The safety net will apply to some 200,000 pension savers and about NIS 100 billion in savings. At the committee's urging, the treasury announced that any changes to the security net will be subject to its approval.
"At some point in the treasury's explanation we ceased to understand the reimbursement mechanism," Reuven Rivlin of Likud and Yakov Litzman of Agudat Yisrael said. Nevertheless, the two cast their vote in favor of the proposal in order to prevent delay of its approval.
"Committee members didn't understand the reimbursement mechanism, and the treasury didn't understand it," Haim Katz said. "The mechanism as it was presented is very complicated, and pension savers who are facing a decision on receipt of protection will have no way of knowing what to do. They will have to seek advice from pension consultants and pay them a lot of money," he added.
Not only that, the wording of the ordinances could cause harm to savers seeking to benefit from the safety net, since some of the programs are tax exempt while others are not, Katz added. "Full of holes and problematic, but better than nothing" was how Committee Chairman Avishay Braverman (Labor) described the safety net. He called on the treasury to repair and improve the ordinances to make them clearer.
But Capital Markets Commissioner Yadin Antebi disagrees. "The safety net is quite reasonable. The financial crisis and real market crisis are reflected in decreasing wealth among the public, and in the value of pension savings," Antebi said.
Antebi emphasizes that the safety net provides protection for savings stipends of up to NIS 8,000.
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