Self-employed to get mandatory pension

Self-employed to get man

All self-employed workers will have a pension by 2011, the Finance Ministry announced Monday. Pensions were made mandatory for salaried employees nearly two years ago. "The global economic crisis showed us how important it is to save for the long term," Finance Minister Yuval Steinitz said Monday at a press conference in Tel Aviv. "This is a long-term process, and we will see the fruits in 15 to 20 years when the self-employed of today will have a pension. Since the mandatory pension law for salaried employees was passed, more than 500,000 new pension savers joined." The new plan was reached in cooperation between the Treasury and the Lahav Israel Association of Self-Employed. Currently there are 300,000 self-employed workers, who make up 12 percent of the workforce, according to the Central Bureau of Statistics. About two-thirds of them do not pay into a pension scheme. Under the plan, every self-employed person aged 21 to 60 who earns more than NIS 4,000 a month will be required to set aside part of their income to ensure a minimum income during retirement. The plan gradually brings monthly mandatory deductions to 20% within five years, starting in 2011. The mandatory pension scheme for salaried workers, which was instituted in January 2008, will bring mandatory deductions to 15% within five years. "We have no intention of touching or changing the conditions to other welfare entitlements," Steinitz said. "The mandatory pension scheme for self-employed workers is not being introduced instead of other welfare entitlements but is complimentary to entitlements received from the National Insurance Institute." Self-employed workers who earn a gross salary of NIS 5,000 will have to deduct NIS 200 a month to receive a monthly pension of NIS 750, in addition to the NIS 2,700 pension insurance payment provided by the NII. Self-employed workers who earn a gross salary of NIS 8,000 will have to deduct NIS 800 a month to receive a monthly pension of NIS 3,000, in addition to NIS 4,950 from the NII. Pension contributions will be tax deductible. The yields on provident funds will be tax exempted, as will benefits received at retirement age, up to a certain ceiling. "In effect, on every shekel that is deposited into provident funds, the government is granting half a shekel via the aforementioned benefits," the Finance Ministry said in a statement. Individuals do not save enough for their old age, in particular self-employed workers who tend to focus on more "urgent"expenses, the ministry said. Over time, there is a lack of consistency in individuals' preferences regarding long-term savings, which is liable to lead to a savings shortfall during the first part of individuals' lives, depriving them of a welfare safety net in the future, it said. "Therefore, a mandatory pension law should be enacted that provides for governmental assumption of responsibility for individuals' long-term pension savings," Supervisor of Capital Markets, Insurance and Savings Yadin Antebi said.