Ministry of Finance Supervisor of Capital Markets, Insurance and Savings Eyal Ben-Chelouche has retroactively changed the procedures for pension fund members to switch funds. The decision will prevent the Histadrut (General Federation of Labor in Israel) and Manufacturers Association from collecting commissions for brokering the movement of pension fund members to new funds. "This is the end of line for Histadrut members club ''Haverim u'Marvihim'' (Members Profit) and the Manufactures Association's venture," said an insurance company CEO in response.
The Supervision of Insurance Law (1981) forbids any party that is not an insurance agency from receiving commissions. The Manufacturers Association and Histadrut's pension venture through ''Haverim u'Marvihim'' was based on a complex corporate structure, in which participating insurance companies would maintain agencies, which could legally collect commissions from the insured persons' contributions.
''Haverim u'Marvihim'', headed by Rachel Turgeman, signed agreements with Clal Insurance Enterprises Holdings Ltd. (TASE:CLIS) and Harel Insurance Investments (TASE:HARL). The Manufacturers Association signed agreements with Clal Insurance, Migdal Insurance (TASE:MGDL) and Israel Phoenix Assurance (TASE:PHOE1;PHOE5).
In an amended circular on the transfer of funds between pension funds, published yesterday and coming into effect immediately, the Ministry of Finance described permissible brokerage commissions as "a commission received by an authorized insurance agency not held (directly or indirectly in any amount) by the insured person's employer, employers association, or union (i.e. the Manufacturers Association and Histadrut, E.P.), and this commission will not be transferred directly or indirectly to the employers association or the union."
The Ministry of Finance has thus destroyed the foundation for the ventures. The Manufacturers Association and Histadrut can of course carry out pension ventures, but they cannot receive any recompense for them.
The Ministry of Finance's circular includes an appendix requiring a representative of a pension fund receiving new members to explain to them that "it will not receive or give any benefit from the member's decision to switch, except for the permissible broker's commission."
Ben-Chelouche dated the circular September 27, adding that its instructions also applied to requests to transfer money signed by insured persons since September 20. The circular stipulates that any such requests must be rewritten.
The Ministry of Finance applied the circular retroactively, stating that any instructions for switching pension fund members signed between April 1 and the date of the circular were invalid "and are as if they were never signed."
Pension fund members can begin to move between funds beginning on October 1. However, the members will not actually be able to switch, because the new pension fund regulations, which define the funds as yield funds, have not yet been approved.
Published by Globes [online] - www.globes.co.il - on September 28, 2004