(Recasts with announcement of plan)
TEL AVIV, Dec 8 (Reuters) - Prime Minister Ehud Olmert on Monday unveiled a long-awaited plan to provide a safety net for battered Israeli pension savings.
The plan, which was drawn up by a working team from the finance ministry, the Bank of Israel and the prime minister's office, will cover retirement savings for those aged 57 and over, Olmert told a news conference.
The finance ministry had sought to limit the guarantee to those aged at least 60.
The legal retirement age in Israel is 67 for men and 64 for women.
"The finance ministry wanted to delay implementation of the plan," Olmert said, but added that he agreed with Bank of Israel Governor Stanley Fischer's recommendation that it should be implemented immediately.
The cabinet will have to approve the plan and decide when it will take effect.
The proposal would provide guaranteed returns only for savings of up to 750,000 shekels ($190,000), Olmert said.
Israeli pension funds have been hard hit by sharp falls in Israeli stocks and bonds because of the global financial crisis. The funds' value declined by an annualised 9.4 percent in the first 10 months of the year.
This has become a central campaign issue in the run-up to a general election set for February 10. The Histadrut labour federation has threatened to call a general strike if a safety net is not implemented.
The finance ministry objected to a safety net due to the high costs to the government's budget.
"The general mood among the public and especially the psychology of the masses, who were influenced by the fact that we are in a period of political turmoil, in a time of elections, led the finance ministry to draw up a safety net for pensions," Finance Minister Roni Bar-On said.
The finance ministry on Sunday submitted to the cabinet plans for 21.7 billion shekels investment in infrastructure projects and to guarantee 11 billion shekels of debt in a bid to ease a credit shortage and prop up the corporate bond market.
Olmert called on parliament's finance committe to approve these proposals as soon as possible.
Fischer has said he favours providing a limited safety net for pension plans. The governor told a news conference last week that the plan needs to be focused only on those who are retiring soon and are likely to be hurt by the current crisis.
"The biggest danger in creating a safety net is that everyone will rush to be more and more generous, to broaden the net, and its cost will increase and the next generations will pay the price in the coming years," Fischer said. (Reporting by Tova Cohen; editing by Stephen Nisbet)