Israeli Retiree Pays Over $25,000 Annually in Pension Management Fees

An Israeli retiree, identified only as "David," who has saved approximately 2.7 million shekels (about $730,000) in a long-term pension plan, was charged over 92,000 shekels (about $25,000) in management fees in 2025. This exceptionally high fee, reported by the Israeli business newspaper Globes, highlights the potential impact of management costs on retirement savings, especially with older pension plans.

David, an employee of a major high-tech company, joined his pension insurance policy in 2001. The substantial fees stem from a fee structure in his old policy that includes both a 0.6% annual fee on accumulated funds and a 15% fee on real investment profits. In 2025, his portfolio generated over 580,000 shekels (about $155,000) in profits, largely due to a stock-heavy investment strategy, triggering the high profit-based fee.

While the fees are steep, the article explains that older pension policies may offer benefits not found in newer products, such as a more favorable "pension conversion factor." This factor determines the monthly pension amount from the accumulated savings; a lower factor results in a higher monthly payout. David's policy has a guaranteed conversion factor of 157.63, significantly lower than the 190 or more found in many current pension funds.

Therefore, switching from an older policy solely based on management fees can be detrimental, as it might mean losing valuable guarantees and conditions. The Israeli Capital Markets, Insurance and Savings Authority provides tools for comparing management fees across different pension products.

The case underscores the critical importance for individuals to thoroughly understand the fee structures and benefits of their retirement plans, particularly older policies, as management fees can significantly erode long-term savings.