Pension management fees in Israel
In this first articleWe've explained what management fees are for retirement in Israel.
We'll now show you how much you can save on your retirement if you renegotiate your management fees.
In fact, a discount on management fees can translate into savings of tens of thousands of shekels.
So, yes, you won't see the savings right away. But you'll thank us when you reach retirement age.
More seriously, the management fees you pay to the financial institutions that manage your savings have a significant impact on the level of your retirement.
Saving pays off
Let's take the example of two women (Mrs. A and Mrs. B). They both work in different places and joined a pension fund at the age of 30.
Ms. A's workplace has negotiated the management fees charged on her employees' pensions.
In Ms. A's company, management costs are 2% on current contributions and 0.25% on cumulative contributions.
Mrs B works in a place that has not negotiated management fees. She therefore pays the maximum management fees authorized by law for retirement in Israel. The management fee is 6% on current contributions and 0.5% on cumulative contributions.
At the age of 64, these ladies retire. They will therefore have contributed for 34 years.
We'll spare you the calculations, the difference between the management fees paid by these ladies is enormous:
We note a difference of 101,000 shekels in favor of Mrs. A.
Ms. A will receive 600 shekels a month more in her pension than Ms. B.
How much do you pay each year?
To understand how much you pay each year, let's take an example of a person who earns 10,000 shekels a month, and has a cumulative capital of 300,000 shekels.
Management fees on accumulated capital: the maximum allowed by law is 0.5% on the amount of your capital.
In our example, a person who has saved 300,000 shekels up to now will pay 1,500 shekels in management fees on the accumulated capital in the same year.
Management fee on monthly contributions: the maximum fee allowed by law is 6% on each deposit.
In our example, a person earning 10,000 shekels a month usually contributes 1,800 shekels a month (employer and employee contributions combined).
If the management fee is 6%, she will have to pay 1296 shekels in management fees per year. (i.e. 108 shekels per monthly deposit).
In our example, the saver will therefore pay an annual total of 2,796 shekels in management fees alone.
This amount will only increase each year. That's 30% of his gross monthly salary!
We take care of everything, from A to Z
As you can see, simply renegotiating these conditions can be crucial.
Our firm offers a situation analysis service for your retirement in Israel. We'll renegotiate for you and get you the best rates.