Retiree Pays Tens of Thousands in Pension Management Fees Due to Outdated Policy

A retirement planner and blogger, Nadav Tessler, has highlighted a case where an individual paid over 92,000 shekels in management fees for his pension within a single year. This individual, identified as David, holds a "manager's insurance" policy with approximately 2.7 million shekels in savings. In contrast, similar savings in a standard pension fund would have incurred fees of only around 3,000 shekels annually.

The exorbitant fees stem from an older type of manager's insurance policy, sold in Israel until the end of 2003. These policies include a guaranteed, low conversion rate for calculating monthly pension payments, but also charge a 15% management fee on real investment gains, in addition to a 0.6% fee on the accumulated savings. In 2025, a year of significant stock market gains, this fee structure resulted in exceptionally high charges for David, who had invested his savings in a stock-heavy portfolio.

Tessler explained that David, an employee at a large high-tech company, joined this policy in 2001 and benefited from a favorable conversion rate of 157.63, compared to current rates of around 190. However, he was unaware of the substantial cost associated with the management fees on his investment profits, which effectively turned his market gains into a significant penalty.

Tessler advises individuals with similar "profit-sharing" policies, especially those opened after June 2001, to review their annual statements. He suggests that switching to newer, lower-fee pension products might be beneficial. For policies opened before June 2001 with a low conversion rate, he recommends assessing if the retirement track aligns with family needs and checking for any capital components not subject to high management fees. He stresses that any changes to these older, now-discontinued policies are irreversible and professional consultation is essential before making a decision.