Starting in July, 2008 local consumers will be able to switch their pension savings to various other instruments and companies.

After a long series of drafts, objections and lengthy debates in the Justice Ministry, Finance Minister Roni Bar-On yesterday signed off on the regulations allowing the transfer of pension savings, and has passed them on to the Knesset Finance Committee for approval.

The new rules will regulate movement between the various pension tracks: pension funds, life insurance and provident funds. The rules will remove bureaucratic barriers to the transfers, which until now have allowed pension providers to place stumbling blocks in the path of consumers looking for better investments for their retirement savings.

The regulations will take effect on July 1, 2008, and will herald a real revolution in financial markets that will increase consumers' opportunities and power vis-a-vis the providers.

Customers will now be able to move their savings whenever they choose, and as often as they choose - even if frequent moves may not necessarily be to their benefit. They will also be able to bargain over fees and the quality of service - even if in the end they choose not to move their pension savings elsewhere.

In any case, the most important development is that consumers will now be able to choose the most appropriate pension instrument for them and their families.

The move to a new plan will be cost-free and will not create any tax liability. The customer's present provider will be required to make the desired transfer within 10 days. However, in certain cases where insurance policies contain a clause requiring fine for early withdrawal of funds, the insurance companies may deduct that amount.

However, government policies favor pension plans with monthly payments, and not a one-time payout at retirement. Therefore, it will be possible to switch money accumulated in savings plans, such as insurance policies or provident funds, with a one-time payout at retirement to pension funds or other instruments that pay monthly pensions - but not in the opposite direction.

For example, savers can move money from so-called executive insurance policies to a pension fund, but not in the reverse direction. But consumers can move monies between various funds of the same type - for example, between insurance companies.

The process will require filling out a form with the new, desired provider. If the new company wants the customer's business, it will send a request to the old provider within 10 days, and the latter will have at most another 10 business days to make the transfer.

During the first two years after the change, through mid-2010, companies will be allowed 30 days to make the transfer, a temporary period intended to let the providers organize for the change in the system.

Veteran pension funds, run by the state under a special management arrangement, are not subject to the new rules. Present retirees and recipients of disability pensions will not be able to switch either.

Also, anyone choosing to move the pension part of an insurance policy will be allowed to continue the life insurance and disability sections of the policies - and pay for them separately.

The insurance companies will be the big losers from the reforms, and they were also the biggest opponents to the the treasury's draft proposals.

It is likely that many consumers will choose to move their pension savings from the insurance companies, with their high management fees, to lower cost savings plans - in particular, pension funds.

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