Pension Fund Contribution Rate to Be Raised to 17.5%
The contribution rate to employees' pensions fund by law will rise to 17.5% of a person's income in 2014, according to the Ministry of Economics. The change is another step in a series of pension reforms introduced in 2008.
On January 1, 2008, a law went into effect requiring employers to give each and every employee a pension plan after six months of employment. The pension plan would see 1.66% of the employee's wages per month funneled into a provided pension fund, with the employer providing nearly double that amount in additional contributions.
The new injunction improves the pension benefits for segments of the population without better pension plans; employees already receiving better benefits will not be affected by the change, according to the Ministry.
As part of the additions, all new employees over the age of 20 (for women) or 21 (for men) will also be privy to a pension plan after six months of employment. While the six-month pension benefits had been enacted before, the new provisions also allow for easier transition between different companies; employees with a pension plan from a previous employer will now be able to receive their new pension benefits more smoothly and more quickly.
Attorney Shlomo Yitzhaki, Chief of the Labor Relations Office in the Ministry of Economics, praised the continued extension of the pension benefits. "[The] extension order was beneficial for employees in regulating the provisions given for retirement, disability, or surviving [a terror attack or other catastrophe], Heaven forbid," he stated.
Economy Minister Naftali Bennett said Tuesday that "a state which wants to survive must take care of its adults and the elderly [. . .] sometimes the best way to do this - along with the existence of a social support framework in the form of Social Security and the National Health Law - is a gradual extension of the obligation of employers and employees to put more money away now to ensure a better future."
Bennett reiterated the pertinence of the law - not as a guideline, but as a mandate. "It is important that employers understand - this is not a recommendation, but an extension of a mandate which they are bound to by law," he explained. "Inspectors of the Ministry of Economy in charge of enforcing the rights of employees will actively enforce the law, impose financial sanctions on violators of the order, and ensure all means the right of employees to live during retirement with dignity."
Bennett's comments come just hours after news broke that the poverty rates in Israel are especially high, particularly among the elderly. In addition, the National Insurance Institute (Bituach Leumi) revealed last week that it spends 50% of its annual funds on the elderly, prompting a need for changes in pension laws.