After Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig tried on Wednesday to calm the public outcry over the Ministry of Finance's apparent intention of reducing monthly pension payments by 10% to future pensioners, the ministry issued a clarification saying that no decision had been made. It added that the document issued by the Capital Markets Division was a preliminary document for comments by institutions, and it should not be seen as an announcement of an immediate reduction in pensions.
The Ministry of Finance said that the document only mentioned the capitalization interest on pensions, and that the amount of a future pension was determined by other factors as well. Therefore, any conclusion about the size of a future pension is premature.
The outcry was in response to a Ministry of Finance statement earlier this week, that it would adjust the calculated interest to the low prevailing interest rates in Israel and other countries, which in practice would result in a 10% reduction in monthly pension payments compared with what they a pensioner could expect before the change. The measure infuriated the public, and Sarig said yesterday that the measure was necessary under the circumstances, and solved the problem of improper subsidies that currently exist in new pension funds.
Published by Globes [online], Israel business news - www.globes-online.com - on August 15, 2013
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