PM: Pension plan safety net compromise reached

According to compromise, retirees 57 and over will have pensions up until NIS 1.5 million insured.

Bar On Olmert 88 248 (photo credit: Ariel Jerozolimski [file])
Bar On Olmert 88 248
(photo credit: Ariel Jerozolimski [file])
Prime Minister Ehud Olmert on Monday announced a plan for the immediate implementation of a limited safety net for pension savers aged 57 and older, despite opposition by the Finance Ministry. "For the past week, a team of professionals was tasked with preparing the correct pension protection plan based on a consensus among the Bank of Israel, the Finance Ministry and the Prime Minister's Office, the ultimate goal being to protect citizens of the State of Israel and those who have saved for a long time," Olmert said during an evening press conference at his Jerusalem office. "This is the money they set aside for their retirement and we cannot abandon them," he added. The safety net will apply to those aged 57 and over with accrued pension savings of up to NIS 1.5 million. However, it will guarantee only part of the funds and will not be retroactive. The plan will guarantee NIS 750,000 at the maximum savings level, which is equivalent to approximately NIS 8,000 in monthly income - the average wage in the economy. Pension savers aged 57 and above with an accrued pension fund of between NIS 1.25m. and NIS 1.5m. will have NIS 600,000 in guaranteed savings. The safety net will not apply to members of the "old" pension funds, people with budgeted pensions or those with managers' insurance (bituah minahalim) "Public opinion, and especially the public's state of mind, which has been profoundly affected by the tempestuous political times we face ahead of elections, put pressure on the Treasury to provide a solution - the safety net," said Finance Minister Ronnie Bar-On. "We don't see the urgency in terms of the markets' behavior in implementing the pension safety plan at this point in time." Histadrut chairman Ofer Eini, who threatened a strike should the government fail to implement a safety net, welcomed the prime minister's plan. "Despite the stubbornness of the finance minister, Olmert has shown leadership at a time of economic crisis and succeeded in reaching a consensus for the immediate endorsement of a pension safety plan," said Eini. Business sector representatives appeared relieved over news of the safety net, whose delay had been holding up approval of the Treasury's economic stimulus package. "Now that the pension safety net plan has been removed from the agenda, we can turn to the enforcement of the Treasury's economic aid plans to help increase credit sources for the business sector, in particular for small- and medium-sized companies," said Uriel Lynn, president of the Federation of Israeli Chambers of Commerce. Olmert's plan is a compromise between the limited safety net proposed by the Treasury and the broader approach he had originally demanded along with the Histadrut. One of the major issues dividing experts from the Treasury, the Bank of Israel and the Prime Minister's Office was the age factor. The Treasury's proposal would have applied only to those aged 60 and older earning less than twice the minimum wage, or about NIS 7,700 a month. The proposal originally put forward by Olmert's team was to lower the minimum age of the plan's beneficiaries to 55.