In January 2017 was launched the "savings for each child" program aimed at securing for all Israeli children, long-term savings from which they can benefit at the age of 18 or 21, for various purposes, to provide them financial support in their early adult life. Under this program, NIS 52 is deposited, in addition to the child allowance, from public funds which are transferred by parents to a bank savings plan or a provident fund. Parents have the option to make an additional deposit of NIS 52 drawn from the child allowance to which they are entitled, and thereby to double the monthly amount of deposited savings, an option that has a significant impact on the total amount of money their child will receive in adulthood.
At present, the deposits are distributed among 9 banks and 12 savings banks, although parents who have chosen a provident fund can decide to transfer the savings from one fund to another or change investment profiles, but are unable to transfer them to a bank. Whereas those who have chosen to open a savings account with a bank can change investment profiles within the same bank, provided they have opted for an exit window. In this regard, the law provides that they will neither be able to move savings from one bank to another, nor transfer them to a provident fund.
Between January and December 2021, the total amount paid into the savings program reached 2.935 billion Shekels, which includes basic payments as well as additional payments made by parents. The overall return for the children from savings deposits opened that year in banks and provident funds amounted to 3.78 million Shekels. In total, since the beginning of the program, 15.2 billion Shekels have been transferred to savings plans.
In 2021, savings plans were opened for 177,603 children, while 112,432 were born during this year. Among them, 65,740 children (58%) had their savings plan selected by their parents, while 46,692 children (42%) received a savings plan selected by default by the National Insurance in the absence of parental choice. However, the six-month period allowed to select a savings plan option has not yet ended for children born in the second half of 2021, and a plan has not yet been selected for some children. It is important to note that regarding all the children born in 2021, i.e. 181,545, if concerned parents refrain from making a choice by the end of the selection deadline, the selection rate will only stand at about 36%.
Of the 46,692 children for whom a savings plan has not been selected by parents yet, 9,876 are the first born in the family, meaning that the default choice is a provident fund with a low risk profile, and 36,816 children came after a first born, for whom the default choice is either a provident fund or a bank, according to the existing situation for the child born before them in the family. In addition, for all these children, no additional NIS 52 deposits were set up.
Mr. Meir Spiegler, Director General of National Insurance: "The non-participation of the parents has an obvious influence on the amount of savings that the children will receive at age 18 or 21. Making the right choice of savings profile for our loved ones is an extremely simple, unbureaucratic procedure. By investing a few minutes on the National Insurance website, you can set aside large sums of money for them as adults, and ensure that inequalities between population groups are reduced. Parental involvement is important and necessary for their children's future."
As of December 2021, 4,021,516 savings plans have been identified since the program's inception, of which 3,396,418 remained active in 2021, and 652,098 have been terminated and are inactive due to money withdrawal or transfer between two entities.
Among these 4,021,516 savings plans - 892,671 (22%) were opened in banks, with Bank Poalim leading the savings ranking, followed by Bank Leumi and Mercantil (full list available in the attached report, page 3).
3,128,845 (78%) were opened in provident funds, with Altshuler Shaham fund leading in terms of savings, followed by Harel and Psagot (full list available in the attached report, page 4).
During 2021, 150,150 children turned 18 and received 18-year-old grant deposits. The amount of subsidies involved reached almost 77 million Shekels. In addition, 90,610 children turned 21 and received 21-year-old grants (for those who did not withdraw their savings at the age of 18). The amount of these grants reached approximately 46 million Shekels. 128,235 savings plans were fully withdrawn in 2021 (from the age of 18) and the total amount of savings withdrawal in question amounted to 463 million Shekels.
The National Insurance and the Minister of Social Security, Mr. Meir Cohen, Knesset member, are currently trying to promote a number of actions to amend the law, in order to further improve the efficiency of this program and the mobility between banks and provident funds. We are also considering other modifications, such as changing the deposit amount, etc.
The report that we produce every year in the Research Department of the National Insurance is intended to reach the Knesset, to analyze the data and ensure that a program such as the "savings plan for each child" is as effective as possible and contributes to reducing inequalities between social groups, and to explore ways to generate parents' participation - which is decisive regarding the amount of money that the child will receive at the end of the savings period. We invite you all to visit the National Insurance website and check the situation of the children in the family - all the necessary information is available on the website."