The list of measures planned by the Israeli Ministry of Finance as part of the 2025 budget goes on. In the latest draft of the planned measures published by the Ministry of Finance, it added a new imposition on employees who are supposed to receive the civil service budget pension, an increase in social insurance premiums for the unemployed, restrictions on the new immigrant absorption basket and moving forward with reform of the bill. There are measures that join proposals to tax advanced study funds, cut retirement benefits, and freeze the updating of income tax brackets and public sector salaries and pensions.
Tightening the conditions for civil service budget pensions
The Ministry of Finance wants to tighten the conditions for beneficiaries of civil service budget pensions for those who have not yet retired. Under the title “Increasing equality in employment conditions between the budget pension and the accrued pension,” the Ministry of Finance seeks to increase the amount allocated to workers in the budget pension from 2% to 7%, starting from January 1, 2025.
Today, employees who receive a budget pension (who started working before 2002) enjoy better conditions compared to their colleagues who receive an accrued pension. They pay less during their working years (2% compared to 7%), receive a higher pension in retirement and have absolute confidence regarding their income in old age.
The current proposal seeks to achieve full equality in the proportion of pension employees’ contributions to the budget with those of eligible pension employees – from 2% to 7% – which differs from previous proposals which included a gradual increase. Previous proposals proposed raising the contribution rate to 4% on the wage component between the average wage and the average wage in the economy, and to 7% on the wage component above the average wage in the economy.
The amendment is scheduled to take effect on January 1, 2025. The expected budget savings are approximately NIS 685 million in 2025, gradually decreasing to NIS 595 million in 2028.
Increase National Insurance payments for the unemployed
Another measure that the Ministry of Finance is now putting on the table is to raise National Insurance and Health Insurance payments by 10% from NIS 203 to NIS 223 for the unemployed from the beginning of 2025. This will mainly affect the country’s most disadvantaged population and will affect the country’s income. An additional NIS 660 million in 2025.
Limiting the absorption basket for new immigrants
The Ministry of Finance wants to grant the absorption basket only to new immigrants who have assets worth less than NIS 500,000. The basket includes financial aid, in addition to assistance with housing, employment, university fees, and social care. The assistance includes a reduction in purchase tax on the purchase of a home, and an exemption from capital gains tax on offshore assets for 10 years.
Published by Globes, Israel Business News – en.globes.co.il – on October 14, 2024.
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