A study carried out by the Department of Management recommends an efficient way to raise the proportion of weakened workers who save for pension while reducing the amount of management fees. According to the researchers, the move will enforce the expansion order for mandatory pension law.
The study Pension Funds Pooling: Macro-Economic and Social Implications, conducted by Prof. Haim Kedar-Levy (at right) and Dr. Ravit Rubinstein-Levi of the Department of Management at the 
Guilford Glazer Faculty of Business and Management at Ben-Gurion University of the Negev offers an efficient and inexpensive way to raise the rate for people saving to pensions in a manner that will enforce the mandatory pension laws, while reducing the amount of management fees paid by non-unionized workers. The idea is to pool the pension funds into a governmental entity that will constitute a kind of default.
The process of pooling pension funds in Israel is the obligation of private employers in Israel to transfer the money designated for pension savings to a consortium government entity, thereby creating a pool of shared resources. According to the proposal, this entity will transfer the funds to pension funds that will win the tender, in accordance with the choice of each individual in the venue that suits him/her in one of the pension funds. In this way, the pooling of funds will be binding andand mandatory
pension law will
be enforced.
In Israel, as is well known, there is poverty among the elderly population, at significantly higher rates than in OECD countries. Before income supplement payments to the elderly pension of the National Insurance Institute, 50% of the elderly in Israel are poor. After the income supplement payments to the elderly pension, this rate drops to about 30%.
The high rates of poverty exist mainly among retirees who, during the period of employment were weak and non-unionized employees, since these workers faced two main obstacles: 1. In Israel, the mandatory pension law is not enforced and most of the workers without pension savings are weak and non-unionized workers. Approximately 40% of Israel's working population lacks pension savings. 2. Non-unionized employees lack bargaining power and therefore usually pay the maximum management fees - 6% of the savings provisions and 0.5% of the of the accrued reserve, which generally averaged about 18% of savings over all years of savings!
The study, conducted by Dr. Ravit Rubinstein-Levi of the GGFBM, under the supervision of Prof. Haim Keidar-Levy, suggests that the enforcement of the law will be carried out as follows: The government entity will be connected to National Insurance data or alternatively will receive data on a regular basis from the National Insurance Institute regarding all employers and employees in Israel. At the same time, the pension funds will also be obligated, on an ongoing basis, to report to the governmental entity regarding employees for whom pension provisions are made. The entity will cross-check the data and locate employees for whom pension provisions are not made. Employers who do not provide pensions for their employees will be subject to sanctions similar to those imposed by National Insurance on employers who do not pay National Insurance contributions for their employees, including foreclosures of bank accounts, foreclosures of suppliers' payments, arrests. Just as employees who manage their pension savings directly against the pension fund, the employees that will be recruited will receive a comprehensive response to their requests from the pension funds. The pooling entity will also create a significant bargaining power for employees who are weakened vis-à-vis the pension funds, thereby reducing the management fee costs of these employees.
The study findings indicate a potential for significant improvement in the level of poverty among the elderly population and a reduction in inequality in the population due to the pooling of pension funds, since the replacement ratio (post-retirement income divided by pre-retirement income) of retirees who were employees who have been weakened will increase by 32% The proportion of those in the lower income deciles declined, and their share in the higher income deciles increased, such that their rate in the first income decile fell from 20% to about 6.5%.
The findings also indicate a significant reduction in government spending on support payments to the elderly, in light of the expected increase in their income. Despite the growth of the elderly population in Israel, the pooling is expected to reduce government support payments to the elderly population. The pooling effect is gradual due to the need to accumulate funds over the years of savings. The utilization of the collection potential is realized 16 years from the date of the beginning of the collection.
It should be noted that the Arab population and the ultra-Orthodox population have significant characteristics of weakened populations. These populations were analyzed separately in the study.
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