The Ministry of Finance is considering establishing a committee to cap management fees on pension savings, as its response to a private member's bill by MK Haim Katz (Likud) to lower management fees from 2% to a maximum of 0.7% of assets managed.
Capital market sources, who do not manage pension savings, have been urging the establishment of just such a committee for a long time.
The Ministry of Finance said in response, "We have no plans to set up a committee."
18 months ago, Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig submitted a proposal to lower the maximum management fee on provident funds and managers insurance policies. The proposed reduction from 2% would be in two stages, first to 1.5% on the accumulation in 2012, and then to 1.2% of the accumulation in 2015 plus 5% of regular deposits. However, the ministry has been dragging its feet on the proposal, and has never submitted it to the Knesset for approval.
Sarig says that Katz's proposed cap on management fees would be a "hasty and drastic step". At the Herzliya Conference last week, Sarig said, "Capping management fees at too low a figure will hurt small savers who will not be able to receive service, and would result in the collapse of management firms."
The Ministry of Finance is now scared that the proposal to cap management fees at 1.2% in 2015 will face fierce opposition in the Knesset, which will decide to make a faster and steeper cut in the spirit of Katz's bill. This will also take place amid an election year.
At the same time, the Ministry of Finance is very frightened of confronting Katz, who has already bested ministry officials, for example when he helped torpedo the ministry's proposal to raise women's retirement age to 64 from 62. Ministry officials there fore believe that a committee, which would thoroughly examine the issue of management fees, and would submit a consensus recommendation, could solve the dilemma.
The Ministry of Finance has reportedly learned the lesson of its failure to get women's retirement age raised, and with the help of the Prime Minister's Office, it is trying to create a coalition to block a coalition MK.
Ministry's consultant has a conflict of interests
Meanwhile, the Ministry of Finance has hired a strategic consultant - Motti Scherf - who has a clear conflict of interests; his firm has scores of business clients. He was hired a few weeks ago to advise Minister of Finance Yuval Steinitz on a range of issues, including readiness for a recession, response to the State Comptroller Micha Lindenstrauss's report, and the handling of the social protest.
Scherf's clients include Israel's largest provident funds management company Psagot Investment House Ltd. and the Provident Funds Association, which bitterly opposes cutting management fees and has frequently said so publicly, through Scherf.
The Ministry of Finance said in response, "There is no conflict of interests. Scherf Communications Ltd. does not provide the ministry with consulting services related to the capital market, no will it be asked to do so in the future."
Published by Globes [online], Israel business news - www.globes-online.com - on February 5, 2012
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