SAVING PLANS SAVING PLANS

Transcription

1 SAVING PLANS 1

2 Table of contents 1. General Accumulation in savings plans...5 Table G-1: Accumulation in all savings plans in the years Table G-2: Accumulation in all savings plans classified per deposits Table G-3: in the years Deposits, payments, accumulation and balance of assets In savings plans in the years Figure G-1: Accumulation development in all savings plans in...8 Figure G-2: Monthly accumulation in in continuance plans...9 Figure G-3: Distribution of all savings plans per types in the years Table G-4: Average yield of various investment channels between the years Figure G-4: The amount of money a saver who invested NIS 100 in the same investment channel for 6 years will receive Index-linked Savings Plans...12 Figure G-5: Real average interest in index-linked savings plans for two years and real average yield for a redemption of two years on index-linked debentures at fixed interest...12 Figure G-6: Deposits, payments and accumulation in index linked savings plans in Figure G-7: Deposits, payments and accumulation in index-linked savings plans in Foreign currency linked savings plans...14 Figure G-8: Rate of change in the dollar exchange rate compared with the rate of change in the consumer price index in the years Figure G-9: Deposits, payments and accumulation in foreign currency linked savings plans in Figure G-10: Deposits, payments and accumulation in foreign currency linked savings plans in Figure G-11: Monthly accumulation in dollar linked savings plans and the dollar s exchange rate in Figure G-12: Real difference in yield between an index linked savings plan and a dollar linked savings plan in Regulation

3 1. General The capital market plays a central role in the economy growth. It plays an important central role in the routing of savings money to investment purpose and bridges over the gap between the needs of savers on the one hand and the desires of investors on the other regarding the scope of amounts, their liquidity, the risk level and the investment channel. Savings plans are one of the financial saving channels in the capital market and they have an important part in mediating between the parties by creating the proper financial frameworks. Additional channels and additional financial mediators are the provident funds, trust funds, life insurance plans, pension funds and more. The savings plans are designated for individual savers only that are not defined as a corporation and most of them are run in regular banks and mortgage banks. These plans cannot be transferred to another beneficiary therefore a beneficiary cannot be added to a savings plan after it is opened. 24 banks and other institutions are currently running savings plans for the wide public. The scope of assets of the savings plans has reached in some NIS billion. The savings plans act by virtue of the Saving Encouragement Law, income tax benefits and loan guarantees 1956 that authorizes the Minister of Finance, with the approval of the Knesset Finance Committee, to regulate the depositing conditions and to manage deposits that are entitled to tax-exempts or tax benefits. The savings plans used for short, medium and long-term saving for households (2-18 years) provide the savers with a tax-exempt on the profits of linkage differentials and the interest credited to these plans. There are dedicated savings plans that define in advance the purpose of saving and there are savings plans with no defined purpose. Most of the savings plan management is done by the banks and may be classified according to several properties: Linkage basis index linked or exchange rate linked plans (including the currency basket) or a combination of the two. Way of depositing a one-time depositing or periodical depositing. Purpose savings plans for any purpose or dedicated savings plans e.g. for higher education, housing, car etc. Hereinafter is a trend analysis of all the savings plans according to the linkage basis, analysis of the total deposits less total payments (hereinafter: the yield ) and a description of the part of the Stock Market Section in the regulation and current supervision on the savings plans. 3

4 Main findings In the balance of assets in all the savings plans declined in a real rate of some 2.8% and aggregated NIS billion. This was the continuance of the real decline at the rate of about 6.7% in and a minimum average real increase per year of 0.1% in the last five years. Most of the decline in the balance of assets of all savings plans in the reviewed year may be explained by the negative accumulation that was set on some NIS 7.4 billion whereas the yield (linkage differentials and interest that are credited to the money in the savings plans) sets-off the negative accumulation, in continuance to the negative accumulation of about NIS 11.7 billion in The fact that the public continued to prefer depositing in Shekel deposits and trust funds that specialize in solid channels on the background of the decline in the inflationary expectations, the actual decline in the inflation in 2000 and at the beginning of and the rise in expected yields on these assets (with them being more liquid) resulted in a high negative accumulation in the index-linked savings plans that are the lion s share in all savings plans. In, the index-linked savings plans had a negative accumulation of some NIS 7.1 billion and their balance of assets has really declined at the rate of some 4.2% compared with the year Foreign currency linked savings plans also had a negative accumulation of about NIS 1.3 billion and their balance of assets declined at the rate of about 6% compared with the year Unlinked savings plans had a positive accumulation of about NIS 1 billion in. In, the balance of assets of the unlinked savings plans really increased at the rate of 60%. The rate of these plans out of all savings plans aggregated about 4.1% compared with 2.5% and 1.8% in the years 2000 and 1999 correspondingly (see figure G-3). The rate of all savings plans out of all public assets increased in about 8.4% in (according to the estimate of the Bank of Israel), compared with about 9.1% in 2000 and about 10.5% in The decline in the rate of all savings plans out of the total of public assets integrates with the general trend in the portfolio of public s assets, that is characterized by an increase in the value of unlinked assets on account of index linked assets. All the data are in current prices unless stated otherwise. 4

5 Year 2. Accumulation in savings plans Table G-1: Accumulation in all savings plans in the years Classified by the type of plan (In billion NIS in current prices) Index-linked plans Foreign currency linked plans Unlinked plans Total accumulation Balance of assets at end of year Quarter 1/ Quarter 2/ Quarter 3/ Quarter 4/ Source: Bank of Israel Note: The gap between the balance of assets for year X plus the accumulation for year X+1 and the balance of assets for year X+1 is the linkage differentials and interest credited to the money in the savings plans. In the years the scopes of positive accumulation that characterized the years changed. These scopes peaked in 1996 where there was a positive accumulation of about NIS 11.8 billion. In 1999, for the first time since 1992, there was a negative accumulation in the total accumulation of index linked savings plans and foreign currency linked plans. Nevertheless, the total accumulation in all the savings plans (including unlinked plans) remained positive, and was set on about NIS 48 million. One can see that in the years 2000 and the negative accumulation yield was strengthened in all savings plans although the positive accumulation in unlinked savings plans for the third year in a row. The negative accumulation recorded in in all savings plans resulted mainly from the accumulation in the two first quarters of the year where there was a negative accumulation of about NIS 7.5 billion. In the third quarter, a real moderation in the scopes of negative accumulation was indicated whereas in the forth quarter of there was a positive accumulation. The negative accumulation in all savings plans was unable to lower in a considerable manner the balance of assets of the savings plans, due to the linkage differentials and interest that set off in some NIS 6 billion the negative accumulation. 5

6 Table G-2: Accumulation in all savings plans classified per deposits in the years (In billion NIS in current prices) Year Accumulation in one time deposits Accumulation in periodical deposits Total accumulation Quarter 1/ Quarter 2/ Quarter 3/ Quarter 4/ Source: Bank of Israel Note to the matter of deposits: the data include unlinked savings plans. The negative accumulation trend in savings plans characterized in periodical deposits in the years ended in 1999, yet was resumed in the year 2000 and strengthened in the year where there was a negative accumulation of about NIS 1.36 billion. By combining the information of Table G-1 and Table G-2 one can see that the positive accumulation in the forth quarter of is in one-time deposits in index-linked savings plans. The accumulation in savings plans characterized by periodical deposits is less influenced by other alternative investments than savings plans characterized by one-time deposits, for two reasons: 1. In these plans the savings is mainly done by standing orders or deduction from salaries therefore the savers in these plans are less inclined to transfer their money to other investment channels. 2. Periodical deposits are in most cases characterized by deposits in small amounts of NIS per month. On the other hand, one-time deposits are very much influenced by the actual rate of inflation, the expected rate of inflation, the yields of other alternatives in the capital market and by changes in the preferences of the public of savers (liquid preferences, range of saving, the saver s level of carefulness in taking risks, exploitation of tax attributes etc.). Therefore the option given to savers to change their preferences and channels of investment in savings plans characterized by one-time deposits is broader than their option in savings plans that are characterized by periodical deposits. Indeed the lion s part of savings plans (about 80%) is characterized by onetime deposits, compared with 20% that are characterized by periodical deposits. 6

7 Savings plans Table G-3: Deposits, payments, accumulation and balance of assets in savings plans in the years (In billion NIS in current prices) Deposits Payments Accumulation1 Balance of assets 2000 Change 2000 Change 2000 Change 2000 Change Index linked % % % % Foreign currency linked % % % %- Unlinked % % % % Total % % % %- Source: Bank of Israel 1 Deposits less payments. Table G-3 shows that the decline in negative accumulation in index-linked savings plans in compared with the year 2000 resulted mainly from the decline in the rate of payments that declined at the rate of about 15%. Yet the decline in accumulation in foreign currency linked savings plans in compared with 2000 is explained by the decline of about 64% in deposits to these plans. Unlinked savings plans had a certain positive accumulation due to the sharp increase in the amounts of deposits at the rate of about 75%. In spite of this sharp increase, unlinked savings plans continue to be a marginal part of all savings plans about 4.1% as of the end of (2.5% at the end of 2000). Most of the amounts of payments in savings plans were transferred to alternative investment channels, like Shekel deposits and short term-loans (STLs). These channels offer a nominal yield that embodies the inflationary expectations for the period of investment in these channels. It seems that the nominal yield less inflationary expectations offered by these channels in the first five months of was higher than the real yield offered by indexlinked savings plans, since during this period there were higher scopes of payments than those in other months of the year. 7

8 Figure G-1: Accumulation development in all savings plans in (In million NIS in current prices) Deposits Payments Net accumulation January February March April May June July August September October November Desember Source: Bank of Israel Figure G-1 shows that the trend of negative accumulated moderated in all savings plans in June, a trend that also changed direction in August. There may be three possible explanations: 1. Starting from the month of June there was a decline in the scopes of negative accumulation in continuance plans (see figure G-2). This explanation is technical, since this means that a smaller number of continuance plans reached the end of the saving period in the second half of year. It should be mentioned that throughout the negative accumulation in continuance plans added up to about NIS 2.46 billions which are about 33% of the total negative accumulation in all savings plans. As of the end of the continuance plans had about NIS 5.2 billions that are supposed to get out of the channel of savings plans in about three years compared with about NIS 7.4 billion in 2000 and about NIS 10.2 billion in The money in these savings plans, which basic saving period expired or which continuance plans ended and that in the past the banks would have transferred them to continuance plans (usually under conditions that are less favorable than the conditions at the date of transfer) are currently transferred according to the Saving Encouragement Law and the instructions of the Capital Market Section in the Ministry of Finance to a renewable monthly deposit (see also Chapter 5 Regulation). 8

9 Figure G-2: Monthly accumulation in in continuance plans (In million NIS in current prices) January February March April May June July August September October November Desember Source: Capital Market Section. 2. Starting from July, there has been a decrease in the amounts of payments and an increase in the amounts of deposits in index-linked savings plans. Here too the decline in payments results from a technical reason; meaning less money in the savings plans reached the end of the saving period or the first exit station in the said period. Regarding the increase in the amounts of deposits, no satisfactory reason has been found. 3. For the first time since October 2000 there were net redemptions in the Shekel trust funds in July. These redemptions kept increasing in the two following months, and peaked in September where there were redemptions of about NIS 5.1 billions. In the three months starting from July there were redemptions of about NIS 10.5 billion. These redemptions are on the background of a decline in the high yields relatively to alternative channels of investment that these funds achieved at the end of 2000 and in the first half of (an average negative accumulation of 0.2 in the Shekel funds in July- September ). It is estimated that these funds were in the last years a relatively attractive channel of investment for savings plans, therefore the decline in yields and peak redemptions of these months may explain the reduction in the scope of payments and the small increase in the amounts of deposits, since the alternative of investing in these funds have become less attractive. 9

10 Figure G-3: Distribution of all savings plans per types in the years (In percentage) Unlinked plans Foreigncurrency linked plans Index-linked plans Source: Bank of Israel. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Between the years the rate of assets of unlinked savings plans increased in about 100% (from 2% to 4%). This increase was on account of a reduction in the rate of assets of index-linked savings plans, as the rate of assets of foreign currency linked savings plans remained at a similar level in these years. It should be indicated that unlinked savings plans are defined as alternative plans that impart the saver the increase of index rate plus a certain interest or the Shekel interest specified in the savings plan, the higher of the two. Since the banks are obligated as a minimum to impart the savers, at the end of the saving period, the amounts of deposits fully linked to the increase of index rate or the appreciation of the exchange rate of the foreign currency to which these savings plans are linked. Table G-4 shows the yields of various investment channels between the years These yields express the average yield assured to a saver during the said years at the time of investment. These yields do not express the actual yield achieved by the saver in the various channels, since this depends on additional factors including merchantability, market prices, dates of investment and exercise etc. One can see that there is a correlation between the interest offered in the savings plans (index and foreign currency linked) and the average yield for redemption in debentures (index linked at average interest and dollar linked at a variable interest correspondingly). Figure G-4 shows the amount of money a saver who invested about NIS 100 in a certain channel and persisted in that channel of investment for 6 years (1996-) will receive. The basis of calculation is that the interest and principal obtained from an investment in a certain channel are immediately invested in the same channel for the same period. For example, an investor who invested in 1996 in Short-Term Loan recycles his investment each year whereas an investor who invested in other channels, as stated, recycles his investment each 10

11 two years. The amount of money was calculated based on the data on yields for redemption indicated in table G-4 and does not take into consideration the influences of tax on those who invest in debentures directly by buying them in the stock exchange. Year Average nominal yield for a redemption of STL 1 Table G-4: Average yield of various investment channels between the years (In percentage) Average nominal yield for a redemption of two years of unlinked bonds at fixed interest 1 Real average yield per redemption of two years of index-linked government bonds at fixed interest 1 Average dollar yield for a redemption of two years of dollar linked bonds at variable interest 1 Real average yield in index linked savings plans for two years 2 Average dollar yield in dollar linked savings plans for two years Source: 1) Bank of Israel; 2) Bank survey Figure G-4: The amount of money a saver who invested NIS 100 in the same investment channel for 6 years will receive (In Shekels) Dollar linked savings plans Index linked savings plans Dollar linked bonds at variable interest Linked bonds at fixed interest Unlinked bonds STL Source: Bank of Israel 11

12 3. Index-linked Savings Plans Figure G-5: Real average interest in index-linked savings plans for two years and real average yield for a redemption of two years on index-linked debentures at fixed interest (In percentage) Savings plans Debentures Spread Source: 1) Bank survey; 2) Bank of Israel The level of yield for redemption in index-linked governmental debentures was in about 4.7% in average compared with about 6.2% in Since a considerable part of the assets of index-linked savings plans is invested in index-linked governmental debentures, the level of yield for the redemption of these debentures may explain the rates of interest in index-linked savings plans. Figure G-5 shows that the average rate of interest in index-linked savings plans equals the rate of yield for redemption in index-linked governmental debentures less a deduction for a certain spread. This spread is set by each bank for the savings plans it runs according to the additional channels of investment where it invests the money of the savings plans. It should be mentioned that this spread does not represent the banks profits from the money that savers are investing in the savings plans, since part of the money in the savings plans is invested in index-linked debentures and some is given as credit to the public, where the spread is of course much higher. 12

13 Figure G-6: Deposits, payments and accumulation in index linked savings plans in (In billion NIS in current prices) 50.0 Deposits Withdrawals Accumulation In billions Source: Bank of Israel Figure G-7: Deposits, payments and accumulation in index-linked savings plans in (In million NIS in current prices) Deposits Payments Net accumulation January February March April May June July August September October November Desember Source: Bank of Israel Figure G-7 shows that the amounts of monthly payments in index-linked savings plans in were quite similar to each other, so did the amounts of deposits in the 2 nd half of. In July, the amounts of deposits increased in a rate that exceeds the increase in the amounts of payments and until October it remained in a similar level. It turns out, therefore, that these are responsible for the slight reduction in the negative yield in the 2 nd half of. 13

14 4. Foreign currency linked savings plans In, in foreign currency linked savings plans there was a negative accumulation of NIS 1.3 billion, compared with a positive accumulation of NIS 1.5 billion in In general, at the end of, foreign currency linked savings plans were about 7.4% out of the total assets of the savings plans, compared with about 9.8% at the end of It is possible that the public failed to foresee a considerable long-lasting devaluation of the Shekel vs. the Dollar, therefore refrained from investing money in these plans although in certain years the rate of change in the dollar s exchange rate was higher than the rate of change in the consumer price index (see figure G-8). Figure G-8: Rate of change in the dollar exchange rate compared with the rate of change in the consumer price index in the years (In percentage) 20.0 Rate of foreign currency change Rate of index change 15.0 In percentage Source: capital market Section From January to November in, there was an average negative accumulation of about NIS 95 million in foreign currency linked savings plans, on the background of the sharp devaluations in the Shekel value vs. the Dollar value in some months of the year. On the other hand, in December there was a positive accumulation of NIS 280 million. One can see (see figure G-10) that the amounts of payments remained in December at a level similar to that of other months of the year, whereas the amounts of deposits increased in December at the rate of hundreds of percentages compared with previous months of the year. The reason is the public expectations that the Bank of Israel will lower the interest in a considerable manner during the 2 nd half of December. These expectations and the actual reduction in interest on 23/12/ have led to a devaluation of about 4.3% in the last two weeks of December. In the meantime, expectations towards another continuous devaluation of the shekel also evolved in the first months of These expectations have increased the 14

15 attractiveness of dollar linked savings plans and have resulted in deposits of about NIS 500 million in December alone. It should be mentioned that in dollar linked savings plans, the deposit s nominal principal is assured to the savers, by maintaining the foreign currency rate of exchange to which the amounts of deposits are linked as the floor rate when withdrawing the money. So that in fact the savers can buy put options from the banks according to the foreign currency rate of exchange in periods where there s a fear from revaluation of the shekel vs. the foreign currency. At the same time the banks price this benefit and offer the savers a substantially lower interest than the labor interest that is the upper limit to the interest offered in foreign currency linked savings plans. This spread is considerably higher than the spread in index linked savings plans, due to the historical behavior of the consumer price index compared with the historical behavior of the dollar s exchange rate. The reason for the difference in spread is twofold: first, whereas in a 2-year saving period (the minimum in savings plans) since 1998 until 2002 there has been no negative change in the consumer price index, the dollars exchange rate has had a negative change. Another reason is the lack of organized merchantable market for buying foreign currency options for periods of two years and more, a fact that makes it difficult for the banks to find sources for financing their commitments towards the savers, not to mention the fact that the cost of these options is as stated very high. Figure G-9: Deposits, payments and accumulation in foreign currency linked savings plans in (In billion of NIS in end of period prices) Source: Bank of Israel Deposits Withdrawals Accumulation

16 Figure G-10: Deposits, payments and accumulation in foreign currency linked savings plans in (In million of NIS in end of period prices) Deposits Payments Accumulation January February March April May June July August September October November Desember Source: Bank of Israel Figure G-11: Monthly accumulation in dollar linked savings plans and the dollar s exchange rate in (In million of NIS in end of period prices) Accumulation Exchange rate January 98 March 98 May 98 July 98 September 98 November 98 January 99 March 99 May 99 July 99 September 99 November 99 January 00 March 00 May 00 July 00 September 00 November 00 January 01 March 01 May 01 July 01 September 01 November 01 Source: Bank of Israel The difference in terms of yield 1 between a deposit of 1 NIS in a dollar linked savings plan and an identical deposit in a index linked savings plan in was about 6.1% in annual terms, meaning a clear preference (post-factum) to a dollar linked savings plan. Similarly, a calculation for this gap has started in 1997 (see figure G-12). 1 Explanation for the calculation: 1 NIS multiplied by (1 + annual dollar interest in a dollar linked savings plan), multiplied by the annual rate of dollar change in relation to the NIS less 1 NIS multiplied by (1 + Annual real interest in an index linked savings plan), multiplied by (1 + the annual increase of index rate). 16

17 Figure G-12: Real difference in yield between an index linked savings plan and a dollar linked savings plan in (In percentage) Source: Capital Market Section, Ministry of Finance 17

18 5. Regulation The Capital Market, Insurance and Saving Section in the Ministry of Finance is responsible for the regulation of the bank savings plans and their supervision. The Section s activity is conducted in cooperation with the Bank Commissioner in the Bank of Israel. As part of this activity, the following subjects were regulated in : Clarification circular regarding the investment of savings plans money On February 14, 2000 the Savings Encouragement Law (Teshura savings plan and income tax exempt) 1993, Savings Encouragement Law (Teshura continuance savings plans and income tax exempt) 1993, the Savings Encouragement Law (a foreign currency savings plan and income tax exempt) 1993, Savings Encouragement Law (continuance foreign currency savings plan and income tax exempt) 1993, Savings Encouragement Law (a housing savings plan and income tax exempt) 1993, Savings Encouragement Law (an apartment savings plan and income tax exempt) 1993, Savings Encouragement Law (higher education for civil servant savings plan and income tax exempt) 1993 were regulated. As part of the amendments, it is impossible to open a continuance plan for new joiners starting from July and a new arrangement for investing the money was set instead. At the end of the basic savings plan, in case that the saver does not notify the bank what to do with the money released from the savings plans, the bank will transfer the money to an interest bearing monthly deposit that will be self-renewed each month for a period of ten months. The deposit will bear interest of no less than the interest customary in the bank for the deposit of that amount for that period. The regulations also say that after ten months the bank will invest the money according to the Banking Order (deposit with no movements) Yet the Banking Order instructs that: a bank corporation will invest the deposit money with no movements according to the last instructions received from the deposit owner, yet if the deposit owner fails to give an instruction during the last four years before the time of investment, the bank corporation will invest the money in a deposit in NIS for the same period with the same type of linkage. Yet what are the set period and the type of linkage used as a basis for reinvestment? Does it refer to those of the original savings plan or those of the unlinked monthly deposit where the money was invested over the last ten months? Therefore the Capital Market Section has published in cooperation with the Bank of Israel a clarification that says that at the end of the ten months where the money of the savings plan were invested in an interested bearing monthly deposit, the money as stated will be invested in an interest bearing monthly deposit that will be self-renewed on a monthly basis according to section 3 (2) of the above order. Consequently, the money will be deposited in an interest bearing monthly deposit that is renewed on a monthly basis both at the end of the savings plans period and after ten months since that date. 18

19 Clarification publication regarding the opening of trust savings plans for individuals In several applications filed to the Capital Market, Insurance and Saving Section, the Section was asked to approve the opening of savings plans for a private customer through a trust company of the bank, that holds financial and other assets for him. The stand of the Capital, Insurance and Saving Market Section was that these savings plans couldn t be opened (except for exceptional cases to be specified below) for the following reasons: Section 5 to the Saving encouragement, Income tax discounts and loan guarantees Law 1956 says that the tax benefits shall apply to a deposit deposited according to the regulations for saving purposes that cannot be transferred. The Saving Encouragement regulations set additional instructions regarding the nature of the saver (an individual only), the capability to withdraw money under special conditions (car, higher education etc.) Opening a savings plan by a trustee, whether the trustee is a private person or a trust company, raises a basic difficulty in the application of the above section and instructions and their supervision. In a state where the savings plan is opened by a trustee as stated, the bank has to deal with the trustee only and to rely on his declarations regarding the beneficiary. In such case it is impossible to verify the saver whether this is indeed an individual or a corporation, what is the source of money (in cases where there may be a case of money laundering), if during the saving period the beneficiary (or the trust company of his behalf) has transferred the ownership over the deposit money to an unknown party etc. Moreover, the bank cannot check and verify that the money taken out of a savings plan managed by the trustee indeed reaches the account holder at the end of the saving period. It should be also noted that in cases where the trustee acts in a saving plan by virtue of an irrevocable power of attorney given to him by the saver, then this is in fact a case of transferring the ownership of the savings plan. The policy of the Capital Market, Insurance and Saving Market Section in the Ministry of Finance is to approve the activity of a trustee in a savings plan only under exceptional circumstances, where the savings plan is aimed in favor of a certain individual and on condition that the individual is not an inmate, under age or seek. In any case that does not fall into the said exceptions, the Capital Market, Insurance and Saving Section does not approve opening a savings plan by a trustee for the reasons detailed above. Notification on an additional extension of the completion date of various savings plans (8/) According to the decision of the Knesset Finance Committee dated 13.9., the Ministry of Finance has signed Saving Encouragement Regulations for all the savings plans that extend the transition period in which it is possible to join the savings plans. The transition period that started on and ended on was again extended until

20 All the rules that were applicable in the transition period that ended on shall also apply in the extended period as specified below: During the transition period savers who have joined the savings plans until May 4, 2000 (inclusive) will be allowed to deposit additional periodical deposits as the interest, linkage differential or exchange differentials and benefits on them will be tax exempt. In periodical deposits where with the agreement of the saver and the bank the amount of saving may be increased, the amounts of deposits in the transition period will be at the rate of the last deposit, rounded upward to the closest sum that is a product of NIS 50 (plus the index linkage or rate linkage as set by the bank). In case where the periodical deposits are set as a rate of the saver s income or as a rate of another amount, the amount of deposit will not exceed this amount during the transition period. For joiners to the savings plans starting from May 8, 2000 the interest, linkage differential or rate differentials and benefits up to or at a later date will be tax exempt. 20