Minister of Finance Yuval Steinitz, Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig, and Knesset Labor, Welfare and Health Committee chairman MK Haim Katz (Likud) yesterday reached a deal on management fees, after Prime Minister Benjamin Netanyahu called the parties to a meeting, as talks between Katz, Steinitz and Sarig were deadlocked. The compromise caps management fees on pension and other funds at a much lower level than the Ministry of Finance wanted. Beginning in 2014, management fees on provident and pension funds and managers insurance will be capped at 1.05% on the accumulation and 4% on the regular deposits. Most of the reduction will be made in 2013, when fund managers will be allowed to charge management fees of up to 1.1%.
Margins will narrow
The Knesset Finance Committee is due to approve the new regulations that will cap the lower management fees, which currently average 2% on the annual accumulation.
Under the original Ministry of Finance plan, management fees on provident and pension funds would have been capped at 1.2% of the accumulation and 5% of the deposits beginning in 2015, with an interim cap of 1.5% of the accumulation. Katz originally proposed capping management fees at 0.7% of the accumulation on provident funds and 1% on managers insurance, and 4% on the accumulation in both cases.
Under the compromise, management fees will fall gradually. In January 2013, they will be capped at 1.1% on the accumulation and 4% on deposits, and in January 2014, they will be capped at 1.05% on the accumulation and 4% on deposits. The caps will apply to all provident fund accounts, but only on new managers insurance policies. They will not automatically apply to current policies.
Pensioners will pay management fees of up to 0.6% on the accumulation. This instruction only applies to recipients of managers insurance who, when they retire, currently pay management fees equal to the amount of the accumulation based on the agreement reached with the insurance company when the savings was opened. The instruction does not apply to members of comprehensive pension funds, who pay a fee of 0.5% when they retire.
There is no change to management fees on advanced training funds and the new comprehensive pension funds.
When the new caps come into effect, the aggregate management fees collected by companies will fall by an estimated NIS 150-190 million, beginning in 2013.
"Catastrophic cap"
Senior managers in the capital market told "Globes" "We are as disappointed as it is possible to be. Between 1.05% and 1.2% there is a huge difference and even the ceiling of 1.2% is catastrophic for the sector. The change is also to take place in 2013 which for us is tomorrow."
Published by Globes, Israel business news - www.globes-online.com - on February 21, 2012
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