The Savings for Every Child plan approved today will enable every child to save NIS 50 a month until age 18 for his pension, according to the proposal formulated by a team headed by Ministry of Finance budget director Amir Levy.
The money will be deposited in a provident fund starting on January 1, 2017, and each child will already have NIS 1,000 in his account as of that date as a result of a retroactive payment that the Ministry of Finance promised to make when the government was formed in the summer of 2015. If the child decides not to withdraw the principal before pension age, the money accumulated in the fund will be tax exempt.
The money will be deposited in a provident fund on a track chosen by the parents (according to the level of risk). The parents can also request that the money be deposited in a bank savings plan (instead of in a provident fund). In this case, they can receive a guaranteed return. The parents can increase the monthly deposit by an additional NIS 50 (making a total of NIS 100), with the extra NIS 50 being deducted from the monthly child allowance.
The Knesset approved an increase in child allowances for 2015-2016 as part of the economic plan, and it was decided to set up a long-term savings plan for each child in this framework. The government decision is based on the conclusions of the committee for the war on poverty.
The budget allotted for the plan is NIS 2.65 billion a year. Under the plan, the National Insurance Institute will deposit NIS 50 a month in a special savings account for each child in his name, and will add NIS 500 to the account when the child turns 18 years old. If the child postpones his withdrawal of the money until age 21, the National Insurance Institute will deposit another NIS 500 when he turns 21. The state will bear all the management costs until the child turns 21.
In the coming weeks, Accountant General Michal Abadi-Boiangiu will publish a tender for selecting the provident funds and banks to participate in the plan.
Commenting on the savings plan, Minister of Finance Moshe Kahlon said that it constituted "another step in narrowing social gaps in Israel, promoting equal opportunity for middle class families and poor people, and increasing awareness of saving. The plan will enable everyone reaching age 18 to begin his adult life with NIS 20,000 in the bank, and will open new opportunities to him. The sum in question is a beginning that will enable every young person in Israel to get higher education, start a business, or use the money for any other worthwhile purpose. The fact that the money will be deposited in the new provident funds for investment will enable savers to obtain an additional return on their money, thereby increasing their savings still further."
Published by Globes [online], Israel business news - www.globes-online.com - on June 22, 2016
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