The Histadrut (General Federation of Labor in Israel) is demanding that insurance companies allocate it 49% of an insurance agency with an inactive license to manage the pension arrangement for members of funds formerly under Histadrut management. The Histadrut also demands that the insurance companies finance the establishment of the agency and its initial operations. This would allow the Histadrut to legally receive commissions from the agency.
The Histadrut sent the demand to the insurance companies yesterday. In the four-month-old negotiations between the Histadrut and each of Israel's top five insurance companies to select a recommended pension fund, the Histadrut is also demanding that the insurance companies collaborate in pensions.
At the conclusion of the negotiations, the Histadrut will recommend to the trade unions to which new pension fund or funds owned by an insurance company they should channel their members.
In this way, the Histadrut intends to empty its former pension funds of all their members. Insurance industry sources claim that the Histadrut earlier promised to transfer at least 100,000 members.
In exchange for the marketing advantage it is providing, the Histadrut is demanding 9.99% of the shares of the winning pension fund management company. This will enable the Histadrut to bypass the required permission from the Supervisor of Insurance for any entity owning over 10% of a management company.
The Histadrut is also demanding half of the management fees the fund collects from its members. Under the new draft regulations published a few weeks ago, the Ministry of Finance allows the funds to charge 6% of the premium and 0.2% of the accumulated amount. The pension funds have asked the Ministry of Finance to raise the rate for management fees, and the ministry will probably allow them to charge up to 0.4% of the accumulated amount.
A senior pension industry source said in response that the Histadrut's demands were legitimate as a broker's commission, but the rate demanded blocks management of the pension arrangement and greatly reduces the insurance companies' margin. "The company that partners with the Histadrut will have to invest its own money. The price is too high under these conditions, and prevents any possibility of a profit."
Published by Globes [online] - www.globes.co.il - on January 27, 2004