Pension funds can be divided into two types: the veteran pension funds and the new pension funds
There are two types of veteran pension funds – the deficit pension funds and the balanced pension funds .
Examples of the deficit pension funds: Mivtachim Mosad, Veteran Makefet, Netiv Pension Fund, Construction Workers Fund…. Which were nationalized by the Finance Ministry and are subject to special management arrangements .
Exmaples of the veteran balances pension funds: Veteran Atudot, Veteran Amit, Teshurah… these funds were blocked for new members until 3/1995.Commencing 10/2003, a reform was carried out of the veteran pension funds, the man points of which are :
- Change in retirement age: For men gradually increasing to age 67 instead of 65 and for women gradually increasing to age 62 and in the future expected to reach age 65 .
- Change in the contributions levels: Employer gradually rising to 7.5%, and the employee to 7%
The pension funds were divided in the past into basic pension funds, which were open to new members until 31/12/1994 (in which there is no insurance cover included) and comprehensive pension funds .
The veteran comprehensive pension fund includes :
- Old age pension Monthly pension after 35 years of seniority and up to 70% of the determining salary at retirement age. The pension reflects an accumulation of pension rights of 2% of the determining salary per year .
- Survivors allowance In case of death of the pension fund member, the spouse is entitled to a pension for the rest of life at a rate of 40% of the determining salary, and each child is entitled to an allowance of 20% of the determining salary up to age 21 (up to a maximum of two children ).
- Disability allowance This a monthly pension for whole of life in case of disability. Received in accordance with the pension that would have been received had the member reached retirement age. Partial disability gives entitlement to partial compensation .
The new pension funds (comprehensive) Marketing commenced in 1995, and they enjoy a guaranteed rate of interest of 5.05% on 70% of the money, the balance being with profits .
Cover under the new pension funds :
- Old age pension
The new pension funds do not guarantee rights. Commencing in 2004 the pension will be dependent upon the amount accumulated and the returns given by the fund. The factor in force on the member reaching retirement age will change in accordance with life expectancy and subject to the fund formula .
It should be noted that the fund can adjust the pension factor, as occurred in 2004 .
This could affect the pension received by members . - Survivors pension
The survivors pension paid by the new pension funds to a widow/widower is 60% of the pension expected at retirement age, for the whole of life. Each child will receive 30% up to 3 children up to age 21 is serving in the military and no more than 120% . - Disability pension
This is a monthly pension for the whole of life in case of disability. The amount received is in accordance with the pension that would have been received had the member reached retirement age. Partial disability gives entitlement to partial compensation .
Amounts available for withdrawal for new pension funds
When making a withdrawal of monies prior to retirement age, the savings amount is low so as to discourage pension fund members from withdrawing monies prior to retirement age .
Generally speaking, it can be stated that approximately 85% of monies are designated for savings, the balance being used to finance disability and survivors pensions and fund management fees .
Early withdrawal results in the member receiving 0% in the first five year, 1.5% interest up to fifteen years and thereafter interest at a rate of 2%