The reduction in the number of pension savings products has been postponed by one year to January 2011. Under the plan, each pension savings management company will have just one product of each type for provident funds, pension funds, and life insurance.
The Knesset Labor, and Health Committee, chaired by MK Haim Katz (Likud) made the decision today. The Ministry of Finance wanted to implement the measure in January 2010.
As part of the amendment that the Ministry of Finance submitted to the Labor Committee, the ministry promised to submit to the committee for approval regulations that will determine the exceptions to the law. In other words, a provident fund management company is not required to merge all its funds of the same kind. An example would be similar provident funds managed for different organizations. The Capital Markets, Insurance and Savings Supervision Department has not decided what these circumstances will be.
As part of the lessons of the global financial crisis, the Capital Markets Supervision Department announced that it intends to abolish the present situation in the pension market, which mostly comprises provident funds, so that fund managers will not be able to several provident funds with the same investment channel, and whose main differentiation is branding and marketing. The department said the result is considerable confusion created by the existence of hundreds of provident funds, some of which are nearly identical, to the detriment of savers.
The Capital Markets Supervision Department has therefore initiated orders to consolidate similar investment plans with the same risk levels so that management companies can offer clearly differentiated plans (for example, equity funds, bond funds, or foreign currency funds).
The Ministry of Finance submitted the amendment as part of the 2009-10 economic arrangements bill. The provident funds industry opposes the measure.
Published by Globes [online], Israel business news - www.globes-online.com - on July 8, 2009
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