In a field where approximately NIS 1 trillion of public money is managed, there is no room for ambiguity. However, Israel’s pension savings landscape still suffers from significant gaps in public knowledge and understanding.
Financial literacy is fundamental to human sustainability. Would we allow someone to drive without a license? Would we let people prescribe medications without proper medical training?
The recent pension fund naming reform, implemented by the Capital Market Authority in 2024, is a welcome and important step forward.
It was designed to bring clarity: to standardize the names of investment tracks so that, at the very least, we can understand where our money is being invested based on the name. This is indeed important. Another goal of the reform was to eliminate the multitude of overlapping tracks offered by different providers, which were often designed to confuse customers. In that respect, the reform has done well.
But can we now compare performance and evaluate funds within the same category?
Financial product ratings are needed
Financial product ratings are a must-have; there’s simply no way around it.
In every domain of our lives, we rely on ratings to assess quality and value, from Formula 1 driver rankings to hotel scores on Booking.com to investment tracks in our pensions.
After all, how else can we decide? How can we be sure that the insurance agent didn’t sell us the plan that pays him a higher commission rather than the one that is best for us? Maybe the fund I chose looks “hot” but is actually risky?
Does the naming reform allow for comparison? The answer, unfortunately, is no. It’s a meaningful step forward, but it does not enable full transparency or valid comparisons.
For example, two tracks labeled “equity” might contain entirely different asset compositions: one could be 95% Israeli equities, while the other might be 70% global equities, with exposure to foreign currencies, exchange-traded funds, and derivatives. An “equity” track could also shift toward a more conservative profile at the discretion of the portfolio manager.
This isn’t just theoretical. Israel is currently facing a rolling political and economic crisis, with a deficit of around 5% of GDP, rising security costs, a sharp decline in foreign investment, and threats to its credit rating. High interest rates and inflation add further volatility, making careful and smart long-term financial planning, especially regarding pension investments, more critical than ever.
In a concentrated market, the thirst for real information is immense.
The public is missing vital information
Israel’s pension system suffers from high market concentration. A small number of institutional players manage most of the public’s assets, the barrier to entry into the industry is very high, and the distribution system is fundamentally broken. As a result, there is often little incentive to provide transparency.
Too much vital information is buried behind convoluted graphs or PDF documents full of jargon. The public simply cannot understand where their money is invested, what the risk level is, what the effective fees are, or what the alternatives might be.
The outcome is predictable: Most people remain in default tracks, and many are unaware that they can switch to a plan that better suits their age, income, or long-term goals.
In an era where the financial burden on individuals continues to grow, it’s critical to understand where you stand. The rising cost of living, an unstable job market, and a pervasive sense of uncertainty – both economic and security-related –make managing our financial future not only a matter of personal responsibility but also necessary for survival.
Pensions are not a luxury; they are the financial foundation for the day we can not – or no longer wish to – work. When reliable, clear, and simple information is missing, the consumer pays – in time, in money, and most of all, in their future. Transparent comparison and rating tools are not a luxury; they are a necessity.
The Israeli public deserves to know where its money is going and whether its pension choices are truly serving its interests or just those of the seller.
The pension name reform is a much-needed step, but it is far from sufficient. Name and branding changes are an important start, but they do not fully address the public’s most basic need: understanding.
To build a pension system that truly serves Israel’s citizens, we need not just transparency but translation into plain language, with clear decision-making tools, and a renewed sense of shared responsibility between the state, financial institutions, and the public.
Because in the end, a pension isn’t just a line of numbers; it’s the economic security of each and every one of us for decades to come.
The writer is CEO and owner of FINQ.