Pension for Employees

 Hi

We have many clients who have asked me about their pensions, because they do not know the law, and some are business owners that feel lost about it. Others have left work, and their pensions have stopped.

There’s an important article here, written by a close friend of mine, Daniel Fastman, who owns a large insurance agency. It’s important to read this valuable information, even you don’t currently have a pension, as one day, in your future, you will not be working, and will need to rely on your pension’s savings.  

Every employee in the State of Israel, aged 21 for males and over 20 for females, is entitled to a minimum

pension - when the pension deposits apply as follows:

The employer is obligated to start savings towards the pension for the employee in two options:

A) If the employee doesn’t have an active pension plan – after 6 months

B) If the employee have and active pension plan – after 3 months need to do the first deposit retroactive since the first month of employment

The employer is obligated to deposit 6.5% of the employee’s gross salary, not including car / travel / and bonuses.

in addition, to which the employer must deduct 6% of his salary for the employee.

Beyond that, the employer must deposit an additional amount of 6% of the salary in favor of a

compensation component (the employer can deposit 8.33% at its discretion, in that case we should add a section in employment agreement call "section 14" ).

The employer is obliged to deposit a pension at least according to the wage of the work and / or the

average wage in the economy - whichever is lower.

For example:

1. The average salary in the economy is 10,000 NIS - the employee’s salary is 20,000 NIS. The

minimum deposit is according to a salary of 10,000 NIS. The rest is a matter of negotiation.

2. The average wage in the economy is 10,000 NIS and the wage of the employee is 6,000 NIS. The

employer must deposit according to 6,000 NIS.

• What is the difference in compensation between 6% and 8.33%?

The difference here is mainly a matter of section 14 - it is a bit complicated, and if you need clarification, you can get answers over the phone.

Pension for the Self-Employed

The law requires every self-employed person, who earns more than NIS 65,000 a year, to deposit a pension according to the following calculation:

The first 50,400 NIS a year is required to deposit 4.45% of the income - about 2,270 NIS per year.

For the self-employed, anything over 50,400 NIS must set aside another 12.25%, and the minimum deposit to comply with the law is about 10,000 NIS, in total.

• The current sanction for a self-employed person who does not deposit, is 500 NIS annual fine. So

far, in the last eighty years that the law has existed, no one has been fined.

• A self-employed person is entitled to deposit pension payments, in order to receive tax recognition, adequate coverage for income of up to 16.5% of his annual profit, and no more than 39,000 NIS per year - very relevant for income earners of over 200,000 NIS, and certainly for family owners.

When Leaving Your Job – What to Do, to Keep your Pension Rights

• If you are in an unemployed period, it is very important to carry out a process called “temporary risk,” which actually keeps your income before retirement, and requires your new employer to deposit retirement for you from day one, without waiting periods.

If you don’t do it, and don’t preserve your rights for more than 6 months - what happens to your pension, and what can be done?

• The pension enters a state of stagnation - there is no insurance coverage, and the next employer

will be obligated to deposit in the pension only from the sixth month of employment, and not

from the beginning.

For more information about pensions, Keren Hishtalmut, or any other insurance call Daniel Fastman -052-5228870

Important

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