Fixation of rights on retirement

What is fixation of rights?

The process of fixation of rights takes place vis-à-vis Income Tax and consists of the long-term fixation of decisions related to the tax reliefs applied to your pension money. Your pension, like wage, is liable to tax, but when you reach the age of retirement there are reliefs in that tax. The tax reliefs upon retirement affect the net pension you will receive.

The tax reliefs are a kind of “exemption package” which you are due and which can be utilized in a variety of ways. In the fixation of rights, you will have to decide the way in which you will utilize your tax benefits when you are retired. This decision – the “fixation of rights” – is made via a Form 161D filed with the assessing officer at Income Tax.

Fixation of rights via Form 161D directly affects the amount of your net pension. The decisions made in the form are highly significant in the long-term, directly affecting all your retirement years. Once 90 days have elapsed from the form’s filing, changes can no longer be made to the form, which is the reason it is called a “fixation of rights”.

What are the ways to utilize the exemption package?

The maximum exemption for 2022 is NIS 4,503 per month. This number is multiplied by a coefficient prescribed by law which, as of today, is 180. Meaning, the total value of the tax benefits package is NIS 810,576.

There are several ways to utilize the exemption package:

1. An exemption on the pension – the tax on the pension will be paid out of the gross amount of the monthly pension, offsetting NIS 4,503.
2. An exemption on compensation – any retirement bonus you received in the last 32 years of work, before reaching retirement age, will be taken into account for the purpose of calculating the exemption on the pension and will be offset from the package after being linked to the index, plus a “fine” of an additional 35%.
3. Capitalization of the exemption on the pension – the exempt pension can be capitalized and withdrawn as a lump sum, provided that the pension is in the amount of a “minimum pension”, which as of 2022 is approximately NIS 4,606. The amount of the maximum capitalization for 2012 is NIS 810,576.
4. A combination of these three tracks.

To reach full maximization of the exemption package, you need to have full strategic accompaniment by a retirement expert. At Kali, our experts are experienced and proficient in managing complex challenges in finances and pensions, possess an in-depth understanding of retirement taxation and extensive experience with the process of fixation of rights.

The full accompaniment provided by Kali in filling out Form 161D prevents financial losses of thousands of shekels.

Form 161D is a highly difficult form to fill out, a slippery bureaucratic slope which, if filled out incorrectly, will cause financial losses. Sadly, many times the assessing officers themselves make mistakes which lead to losses.

The form is packed with details, information and certifications and contains reports of compensation money previously realized by you, references from employers, et cetera.

Kali’s retirement experts will help you gain a better understanding of the complete picture of your pension savings vis-à-vis the exemption package. We will collect all the data, documents and certificates, assist you in making a decision on how to utilize the exemptions most suitable for your needs and fill out Form 161D with you and for you.

We will gain an understanding of the payment dates and amounts of the tax-exempt compensation you received over the course of the relevant period defined by law and of the references supporting the bonus amounts to be filled out in the form. We will calculate the entitlement to a tax exemption on the pension according to the combination/offsetting formula, outline the guidelines provided in the form for the way to utilize the future exemption package on the pension, understand the optimal utilization method based on changes expected in the future, et cetera.

One of our key areas of expertise is making bureaucracy work for you. We are familiar with, and well-versed in, each and every law and regulation down to their smallest details, using that bureaucracy to provide each and every one of our clients personally with as many advantages and opportunities as possible.

We will give you peace of mind on everything related to the paperwork. We provide all our clients with close accompaniment, which, as they reach retirement age, becomes highly critical. We will save you time and money and spare you the need to get bogged down by the complex process of fixation of rights.