The Capital Market, Insurance and Savings Authority, in cooperation with the Tax Authority, publishes a draft circular and a second consultation paper as part of the 2025 pension project. Their tax is entitled to the members and the exercise of their rights in the pension products.
Exercise of such rights is expected, among other things, to lead to an increase in the amount of the annuity paid to the client from the pension funds during the retirement period. In addition, in order to enable pension savers to make informed decisions about their pension savings, the circular proposes to lay an advanced API-based technological infrastructure for the transfer of information between all relevant bodies in a mechanized manner. This step is expected to be another tier in the infrastructure set up for a significant upgrade of the pension clearing house in the future.
At the time of retirement, the state provides savers with significant tax benefits – the realization of the benefits has an effect on the level of the public’s old-age benefits. The joint move of the Capital Market Authority and the Tax Authority is intended to increase the public’s awareness of the rights to which it is entitled, to make the information required for the exercise of such rights accessible in a simple and convenient manner and as a result to increase the level of exercise of such rights.
Awareness-raising will be done through the establishment of a technological infrastructure that will allow institutional entities to offer the saver assistance in exercising the tax rights granted to him by virtue of the law at the time of retirement; The accessibility of the information will be done by requiring the institutional bodies to make accessible to the saver designated information for the purpose of exercising such rights through an application to the pension clearing house. The Authority notes that some of the rights will be accessed to savers directly by the institutional body without it being required to contact an Assessing Officer.
In addition, the Capital Market Authority continues to work to promote an API-based technological infrastructure that will help the saving public get information about all its financial assets from one place and compare their costs. In the coming years, we will gradually move to a world where the pension information will be accessible to the customer at any given moment, at the click of a button and immediately. This is in contrast to the current situation where receiving information from the institutional bodies often takes a long time and receiving information from the clearing house takes 3 business days (starting in May 2022, about 3 hours).
In accordance with the Authority’s directives from February 2023, institutional entities will be required to be prepared to absorb APIs in all of the following interfaces: pension product status (active / inactive), management fees, balances, account transactions, credit, insurance coverage in pension funds and information on compensation funds. In addition, and in accordance with the provisions of the circular published in June 2021, the entities are required to be prepared in February 2023 also to perform actions in the API of joining, transferring funds between provident funds and other changes in the pension product. These measures are expected to significantly simplify the processes in the pension savings market.
This step is in line with the recent reform of open banking, and is another step in promoting Open Finance in the Israeli capital market – that is, a reality in which the customer can receive information on all his financial assets (institutional bodies, banks, credit companies) and compare costs. In this way, the Authority works to promote competition in the pension savings market, to encourage innovation and to increase the public’s pension savings.
D"R. Moshe Barkat, Head of the Capital Market Insurance and Savings Authority: "First of all, I would like to thank the Tax Authority and my friend Eran Yaakov for the excellent cooperation in this matter, for the benefit of the public. The 2025 Pension Project will change the pension system in Israel, by moving to advanced technologies and API systems that will put the pension system in Israel as a leader in this field in the world. The current step will lower regulatory barriers, save the Israeli public the time and hassle of bureaucracy and most importantly – allow everyone to better exercise their rights and for many also increase their pension benefits.".
Eran Yaakov, Director of the Tax Authority: "The move is intended to make accessible to the public who save in provident funds and insurance companies who reach retirement age, the information required to exercise their rights. In addition, the Tax Authority works to improve the service provided to the public and reduce bureaucracy while realizing the profits of taxpayers, among other things by"Creating "Green tracks" In withdrawing pension funds. Along with the circular from the Capital Market Authority, instructions will be given to the provident funds to grant an exemption from withholding tax on withdrawal "Minimal accrual amount" And the transfer of funds between spouses in accordance with the law "Distribution of pension savings between divorced spouses" This is in the fulfillment of conditions that will be published and without being required to contact the assessee with a request for approval of withholding tax."
To read the full consultation document click here