The Ministry of Finance, headed by Minister Avigdor Lieberman, proposes to stop the issuance of bonds intended for pension funds, which are intended to protect savers’ returns, and to replace them with a mechanism that will ensure a minimum return. The dramatic finance proposal appears in the Arrangements Act. The budget department estimates that the move will save NIS 7 billion a year in current expenses.
According to the Finance Ministry’s proposal, savers will be guaranteed a minimum annual return of 5%, and the move will not be harmed and will even improve the situation of pension savers, who currently enjoy a return of 4.86%. The state currently issues non-marketable bonds to funds amounting to 30% of their assets. The volume of the bond issue amounts to NIS 230 billion and is expected to increase in the coming years. The excess return on the bonds involves an estimated expenditure of NIS 8.9 billion in 2021. Instead of the issue, the Treasury offers an alternative mechanism for supplementing the return on the funds.
Despite all this, the Finance move could hurt pension fund retirees, and is expected to provoke strong opposition from the Histadrut, after the moves were made without coordination with it. Another ruling of the Ministry of Finance is the proposal to freeze the average wage in the economy for another year and not to link the allowances to the updated wage. The move was taken following the jump in the average wage due to the corona crisis, and it could adversely affect the salaries of senior executives in the public sector, updating the minimum wage, and so on.
The Arrangements Law also includes taxation on soft drinks, imposition of purchase tax on the use of disposable utensils and reduction of benefits for those entitled to receive a subsidized government mortgage.
Former Economy Minister MK Eli Cohen (Likud) responded: “The Arrangements Law harms citizens and does not include anything in line for young couples and small businesses. The law does not include growth engines that will put investment and lower unemployment at the top of the list of priorities. The tycoons at the expense of the citizens.
“The law includes the abolition of the VAT exemption on online shopping and the lack of social sensitivity with raising tariffs for visiting doctors, reducing the state benefit in aiding mortgage for those eligible and raising taxes on drinks and disposable utensils.”
The Histadrut responded: “We will not allow the land to fall under the feet of the public who save for pensions. The proposed mechanism endangers the economic security of a broad population and must be re-examined. Pension protection is a first task in its importance.
“If the Treasury continues with the snatch on the backs of savers, we will not hesitate to act on all channels to thwart the move.”
Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.
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