Sources inform ''Globes'' that Supervisor of Capital Markets, Insurance and Savings Yadin Antebi plans to end restrictions on the maximum management fees on pension instruments in 2008. Pension products providers will be able to charge fees at their own discretion.
Management fees on long-term savings plans are currently supervised. A provident fund may charge a maximum of 2% on the accrual, a pension fund up to 0.5% on the accrual and an additional 6% on monthly receipts. Insurance companies can charge a management fee of 1-2% on the accrual of life insurance policies and an additional 5-13% from the monthly premium, and there is a ratio between the management fee on the accrual and the receipts.
The Ministry of Finance said in response, “The ministry’s goal is a situation in which every saver can switch his long-term savings product at any time, and the savings product will be easy to understand. Under these circumstances, there is no reason not to open to true competition the products, services, yields, management fees and all other relevant components to the choice of the pension product. The creation of such a situation will also make it possible to reduce intervention of the supervisor in the matter of management fees.”
The Ministry of Finance believes that, in a competitive market, there is no real need for government supervision of prices. It cites as example the lifting of supervision of prices for mandatory vehicle insurance. “As in the case of mandatory vehicle insurance, we created competition, and with its development, we abolished supervision on rates, we’re doing the same in the pension sector. We’ll lead the industry to real and transparent competition, so that we’ll be able to significantly reduce the level of supervision of pension products’ prices,” Antebi said recently.
In addition to lifting restrictions on management fees, the Ministry of Finance will reportedly carry out a supplementary measure by abolishing management fees on current receipts, and allow them to be charged only as a percentage of the accrual. This will create full transparency about the product’s cost for a customer, who will, for the first time, be able to compare the cost of different products: life insurance, pension funds and provident funds. The ministry warns, however, “The consolidation of management fees for life insurance, pension funds and provident funds is not on the agenda at this time.”
Published by Globes [online], Israel business news - www.globes.co.il - on November 29, 2006
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