What is the process of consolidating accounts of pension funds?
Consolidation of accounts is a move by the Capital Market, Insurance and Savings Department of the Ministry of Finance and its purpose is to concentrate all the pension funds of each saver, which are currently scattered in different funds, in one place. Through the move, all pension funds accumulated by savers in inactive pension funds will be transferred to the active pension fund.
Who will have accounts consolidated?
Account consolidation will take place for any person who has an active pension fund in which funds were deposited in July or August 2016 and at least one inactive pension fund (a fund to which no additional deposits are transferred as of September 2015).
Automatic account consolidation will not occur to inactive colleagues who are at least 60 years of age on December 31, 2007, and the accounts registered in their names were opened before that date.
Why is account consolidation good for savers?
- Obtaining a full picture of the pension situation – After consolidating the accounts, savers will be able to receive an immediate answer to questions: What is the expected pension at pension age? What is the amount of management fees paid for total pension savings and how are they relative to all savers in the same pension fund? What are the management fees on the deposit and what are on savings? What is the performance of the pension fund that manages your money relative to other pension funds?
- Concentrated management of pension savings – When all pension savings are concentrated in one place, the saver will have to deal with only one company. This will enable easier management of pension funds, negotiation of terms, making changes in the investment track and even easy transfer of all the money, if one wishes to change pension funds.
- Savings in management fees – management fees in inactive pension fundsare usually maximum. An attempt to lower them is usually met with a refusal by the pension fund manager or acceptance of an offer to make the fund active. Transferring an inactive account to an active pension fund will usually reduce the amount of management fees.
What is the procedure for consolidating accounts?
The procedure will be carried out in three stages:
- Step One: Locating funds registered in the name of the saver in pension funds – By July 24, 2016, the company that manages the pension fund will send a letter (such as a letter) to members of the pension funds it manages. The letter states that the pension fund manager is about to transfer the details of the saver to the Ministry of Finance’s database. If the saver does not want to transfer his details for the purpose of consolidating the inactive accounts, he must send the appendix attached to the letter within 45 days (such as an appendix).
- Second stage: Transfer of information regarding inactive accounts to pension funds managing active accounts – By September 29, 2016, the Commissioner of Capital Market, Insurance and Savings will transfer the details of each saver on his inactive accounts to the company managing his active account.
- Step Three: Sending information about consolidation of accounts to the saver – The company that manages the saver’s active pension fund will send him a letter informing him of the transfer of funds from pension funds in which he is an inactive member to the pension fund under its management and will give him the option to request not to transfer them.
What should I do if I want to consolidate my accounts?
If you have one active pension fund, you are not required to do anything. The procedure is carried out automatically. If you have more than one active pension fund, the consolidation of accounts will take place only after you select the pension fund to which you wish to consolidate your accounts.
What if I don’t want my pension funds consolidated?
You can send the request for non-transfer of details in order to consolidate the inactive accounts (such as a request) within 45 days from the date of receipt of the letter from the company managing the pension fund. If you did not send the letter at this time, you can still object at the transfer stage – when you receive a letter (such as a letter) from the company managing your active pension fund detailing your inactive pension funds prior to their consolidation.
What if I want only some of my pension funds to be consolidated?
The second letter on the subject, which you will receive from the management company, will list all your inactive accounts and you can choose which accounts you would like to consolidate.
Where will my inactive accounts go if I have two active pension funds?
If you have at least two active pension funds, you will receive a letter listing your inactive pension funds from all companies that manage your active pension funds. You will need to choose which inactive pension funds you would like to consolidate into which active pension fund and send your choice as indicated in the letter (such as a letter) you will receive.
I have an old pension fund, will it also be consolidated?
The union is only between new pension funds. Veteran pension funds are not part of the move.
Are managers’ insurance and provident funds part of the process?
The union is only between new pension funds.
Management fees in my inactive pension fund are lower than those in the active pension fund, how should I act?
It is recommended to consider transferring the active fund to the inactive fund and enjoy the cheap management fees for the active part as well or to negotiate to compare the terms, it is of course recommended to take into account other considerations such as the fund’s performance.
What happens if my beneficiaries are defined differently in each pension fund?
The definition of beneficiaries will be according to the receiving fund. Beneficiaries can of course be changed at any time.
The company that manages my inactive pension fund offers me to refuse the consolidation and even offers benefits, is it worth considering?
The process of consolidating accounts is optimal for you, the saver, and this is its purpose. Say “no” to the phone call from the company that manages your inactive account.
I have an inactive pension fund with a large sum of money over NIS 100,000, is it true that if I consolidate the funds and die before retirement age, my survivors will receive less money than if I did not consolidate the funds?
Each case should be examined individually, but it is important to understand that for this additional allowance in the inactive fund, you pay a higher premium each month for insurance coverage in case of death than the premium you would pay if the funds were consolidated.
In other words, all those who do not have a death before retirement age will pay a higher premium for death risks throughout their lives if they have not consolidated, and the savings available to them at retirement age will be lower than those who have consolidated.
Increasing insurance coverage is something a person should do proactively, not accidentally or accidentally, as is the case in most cases.
In any case, it is recommended to consult a professional, especially when the fund has operated a large sum of money.
For more information about account consolidation:
Please note that the information and answers provided are general and partial only and are not intended to replace professional personal advice, based on the applicant’s personal data. If you decide to act on the basis of this information, you bear full and exclusive responsibility for your action and its results, and there will be no responsibility for the organization of Paamonim or anyone acting on its behalf.