The Finance Committee approved regulations that allow pension fund account owners, whose savings do not exceed 7,000 NIS, to extract money without taxation for the next year and a half. The regulations also state that the minimal management fees for pension funds will be lowered to 6 NIS. Lost accounts will charge a management fee of 0.3% of the savings in the account. Today, pension fund account owners must pay a tax of 35% if they extract the money before retirement.
The approval of these regulations concludes talks between Finance Committee Chair, MK Nissan Slomiansky (HaBayit HaYehudi), Labor, Welfare and Health Committee Chair, MK Haim Katz (Likud Yisrael Beitenu) and the Finance Ministry and the other authorities in charge of pension funds.
The Finance Ministry acceded to Slomiansky’s request and raised the amount that will be exempt from taxes when extracting money before retirement from 5,000 NIS to 7,000 NIS.
The tax exemption is for the inactive accounts of employees who have not made any transactions since December of 2011. The exemption will be for a year and a half. The idea is to allow employees with dormant accounts to locate their money via a website that the Finance Ministry has started, and to cancel out the many small accounts in the pension system. These small accounts are defined as economically inefficient by administrators.
Rejuan Grayb, a chief executive in the Monitoring of Insurance and the Market Department of the Finance Ministry, stated that “This is a step towards completing the process started by the Finance Ministry. Today, every citizen can easily locate their dormant funds by the website we are building. This is part of the reform the Finance Committee decided on over a year and a half ago, according to which the management fees will be lowered by 50%.”