Sources inform ''Globes'' that the Ministry of Finance supervision of capital markets, insurance and savings division will this week publish guidelines restricting the fees banks may charge for handling provident and pension funds. The guidelines are being published at a time when a number of banks are demanding unusually high handling fee from insurance companies and provident funds.
The Ministry of Finance has set a distribution fee of 0.25% on pension products. The Knesset Finance Committee is due to approve this fee. However, the Bachar capital market reform committee allowed the banks and pension groups to set bank handling fees through negotiations.
Senior pension industry sources claim that the banks intend use handling fees to recover their losses in revenue from the sale of assets stipulated in the Bachar reform legislation. Israel’s top four banks are expected to make NIS 900 million in revenue this year from provident funds.
Pension funds currently charge maximum management fee of 0.5% on accumulation and 6% from receipts. “The banks have already obtained 0.25% from the Ministry of Finance. They’re now demanding that we pay them 3% from the 6%,” said the manager of a large pension fund.
Sources inform ''Globes'' that Supervisor of capital markets, insurance, and savings Yadin Antebi will publish a draft circular to set limits and outline restrictions for handling fees. The draft will set rules for what is permissible and impermissible, and may distinguish between provident funds already being handled by banks and pension funds, which are a new product that the banks have not yet distributed.
A senior banker said in response that pension funds did not offer the same kind of services as those provided by provident funds. “Histadrut members club ''Haverim u'Marvihim'' (Members Profit) charges insurance companies 4%, while we’re satisfied with 3%. In exchange, a customer receives full and real service for his or her pension arrangements: diversification of money, auditing, and the management of claims.”
Published by Globes [online], Israel business news - www.globes.co.il - on December 18, 2005