After the extension order for compulsory pension entered into force in 2008, the rate of those insured with wages not exceeding 5,000 NIS was 30% lower than the rate of those insured earning 5,000 NIS and more. The main reason is employers’ failure to comply with the extension order for compulsory pension. Kav LaOved’s position is that the extension order for compulsory pension can be anchored into law with the following additions:
1. Workers earning low wages who do not meet the threshold of income tax: The state will pay their share of pension and transfer it to the National Insurance Institute.
2. Employers will be required to transfer their share of the pension to the National Insurance Institute, in addition to payments for health insurance and social security.
3. The National Insurance Institute will transfer payments to pension funds, according to the workers’ choice, like transfers to health maintenance organizations. Alternatively, the National Insurance Institute can manage a national pension fund for low-wage workers to which payments will be transferred from employers and the state for a portion of the workers.
Using the collection channel from the National Insurance Institute will ensure pension for workers after retirement age. It will eliminate the phenomenon of deductions from the worker for pension yet failure to transfer these deductions to the pension fund.
Kav LaOved’s proposal raises the rate of those insured among low-wage workers, saves the National Insurance Institute payment of supplemental income after retirement age, and ensures a raise in the net salary of workers at no additional cost to employers.