Who among us has not compared prices when choosing a refrigerator, car or vacation abroad? But when it comes to choosing the largest and most significant savings in our lives – pension savings, most of us rarely check or compare and rely with our eyes closed on agents who are rewarded for joining one fund or another.
State Comptroller: "The Government Failed" // Office of the State Comptroller and Ombudsman
The State Comptroller's report on the Capital Market Authority's supervision of institutional entities managing long-term savings reveals the following picture: Despite the possibility of mobility between the various funds, the vast majority of requests for money transfers between pension funds and provident funds were submitted by colleagues who were joined by agents (50%-65% in pension funds and 57%-85% in provident funds) - these agents are compensated for adding new clients, Therefore, this does not necessarily indicate the existence of competitiveness that benefits the saver or the insured.
The audit also raised additional deficiencies, inter alia, regarding competition between various players in investment products with the public's available money. It was found that the Capital Market Authority does not sufficiently utilize the budget, and that the computer systems on which its work is based are outdated and lacking. Eight institutional investors hold about 90% of the public's savings, whose financial value is about NIS 2 trillion.
Capital Market Activists Jubilant (Illustration), Photo: Liron Almog (Archive)
The Comptroller states that the relative identity in the investment mix of the entities raises concerns that in the event of financial instability, they will act in a similar manner, thereby deepening the consequences of the situation. The substantial scope of holdings of institutional investors in companies in the Israeli economy, and the relative identity in the investment mix of the entities, raise concerns about the inefficient allocation of resources in the economy and lateral risks.
In addition, deficiencies were documented in the risk management supervision system, particularly in the cyber field, and in the Authority's audit and enforcement system, which is an essential part of the deterrence and supervision mechanism for institutional entities.
State Comptroller Matanyahu Engelman, Photo: Oren Ben Hakon
Comptroller Engelman recommends that the Ministry of Finance examine the establishment of a follow-up committee to examine the substantial scope of holdings of institutional investors in companies in the Israeli economy, and the relative identity in the investment mix of the entities, in accordance with the recommendations of the concentration team. This is because these are the long-term savings funds of the Israeli public that are managed faithfully by institutional investors, whose financial scope is considerable and continues to grow every year.
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