What change will take effect on January 1?
Starting 1st January 2025, parents will be able to transfer future deposits between bank deposits and provident funds for investment. Until now, the first savings track chosen was the one that accompanied the saver until the end.

What is the rationale behind the move?
Over the years, the Every Child Savings Plan has been criticized for the significant differences in returns generated by savings funds managed by investment houses versus funds managed in banks. According to estimates, children whose parents chose to deposit their savings in banks are expected to receive less money between the ages of 18 and 21 than children of parents who chose to deposit their savings in provident funds for investment - the differences may amount to tens of thousands of shekels.

Until now, if parents saw that another bank was generating higher returns, they were not able to transferred to another track. This is in contrast to savers in provident funds, who can transfer their savings to another provident fund at any stage.

According to National Insurance data in 2023, 13% of savings were opened in banks and 87% in provident funds. In addition, since the plan was launched, 41% of parents have not actively chosen where to open their savings. Now even those who have already chosen (or not chosen) may regret it. According to the amendment to the law, parents who previously deposited in banks will be able, starting January 1st, to instruct the NII to open a new savings plan in a provident fund for investment, in which the monthly amount of money will be deposited from now on, but not to transfer the funds accumulated so far.

How can you transfer?
The transfer can be done through the National Insurance website. When it comes to choosing the track to which to transfer the funds, two main parameters must be taken into account. The first is the child's age: "Just as in pension funds, where risk is reduced as you get closer to retirement age, the investment path must also be chosen according to the child's age - the older the child, the more likely it is to choose a less risky investment path." Moshe Kashi, Finance Director at Lobby 99,  an organization that promotes the interests of the public in the government.
Another parameter is comparing returns between the bodies that manage the funds. "Of course, you cannot rely on past returns, but comparing returns will give a certain indication of the differences between the bodies and will help in making the decision." 

Photo credit: Lobby 99

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