We all know the story. You came on Aliyah and started your first job at some point. After a while your Hebrew was a bit better, or you moved to a different neighborhood, and you moved on to the next challenge. Then your horizons were broadened even more, and job number three entered the scene, etc etc.
What this very often means is that there are a bunch of different pension vehicles following you around like groupies from job to job. This can make it hard to keep track of what you have, how your funds are invested and, very importantly, probably means that you are paying very high fees on these old pension pots.
These are all reasons to strongly consider putting your old pension monies together. Here are five things to take in to account when doing so:
1. Fees - The fees you could be paying on your inactive pension monies could be as high as 1.05% annual management for Kupot Gemel and 0.5% for pension funds. That’s instead of an average of around 0.7% and 0.2% respectively
2. Investment - You may have different investment tracks for the different funds, meaning it is difficult to form a coherent investment strategy. Having the funds unified and under one roof helps with this in a big way.
3. The Hoover - You can unify most types of inactive pension pots in to your active fund, and some insurance companies even have a special Kupat Gemel that can suck up (almost) all of the different types of funds under the same roof, whilst at the same time maintaining the original characteristics of each individual amount that is brought in (for example an older fund that enables one-off withdrawals can sit together with a fund that only allows withdrawal as a monthly pension).
4. Keep it Simple - When you retire, instead of having to deal with lots of different companies in order to get your pension, and then receiving 6 or 7 different small amounts every month in to your bank account, you can deal with only one company who transfers you the entire amount.
5. Lump Sum - Upon death, any money in an inactive Pension Fund (Keren Pensia as opposed to Kupat Gemel/Bituach Menahalim) may not be paid out as a lump sum to your heirs, but rather as a monthly amount based on the amount saved in the fund. This is why many people prefer not leave money in an inactive Keren Pensia and instead move it to a Kupat Gemel, which doesn't have this issue.
Of course there can be certain types of vehicles that should not be unified, which is why you are best off speaking to a pensions professional who doesn't work for the insurance company before making the move to tidy up your pensions.
At IAL we have helped many clients to tidy up their pension and gemel portfolios. Contact us here for a free telephone consultation and see how we can help you!