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In U-turn, gov't says will link pensions to wages By Ruth Sinai, Haaretz Correspondent Tags: Isaac Herzog, pensions  A ministerial committee on Sunday reversed the government's decision to link pension funds to the average wage instead of the consumer price index. The committee sanctioned the proposal introduced by MK Orit Noked (Labor) by a majority of five to four, with Labor and the Pensioners Party members coming out in favor while Shas and Kadima cast votes against it. It will now be brought before the Knesset for a preliminary reading on Wednesday. "This step will right the wrong that hurt the generation that built this country," Welfare Minister Isaac Herzog (Labor) said. He added that he intends to cooperate with the Finance Ministry in order to prevent it from appealing the bill and securing the coalition's backing in its first reading. Herzog apparently will also be willing to agree to a gradual change of the law, to be spread over a number of years. Advertisement Ever since the mid-1970s, pension funds were linked to the average salary, according to the guiding principle that pensioners' lifestyles must be proportionate to those of the workforce. In 2003, then-finance minister Benjamin Netanyahu decided to link pension funds to the consumer price index. According to the National Insurance Institute, pension funds have since eroded from 16 percent of the average salary in 2002 to 14.5 percent this year. The Institute's research center estimates that by the current rate, the funds will have declined to 11 percent of the average predicted salary in 2020 as opposed to 25 percent when the funds were first linked to average salary in the 1970s. Linking stipends to the consumer price index inevitably leads to a loss in the funds' value. For instance, children stipends, which have always been linked to the index, were worth 2 percent of the average salary in 2006, but were worth 5 percent of the average salary in 1975 - marking an erosion of over 50 percent in three decades. The Insurance Institute said that had the pension funds remained linked to the average salary, they would have risen by some 5 percent since 2002. It estimated that the treasury saved NIS 1.5 billion from changing the funds' link. Average basic monthly pension funds currently amount to NIS 1,213 for singles and NIS 1,823 for couples. "Pension funds are so low that some have to choose between a loaf of bread and their medicine," MK Noked said. Related articles: Bank of Israel hints Finance Ministry overstates non-contributory pension crisis Pension plan for one million workers to kick off with new year Productive retirement Bookmark to del.icio.us   Slamming Obama McCain uses speech to AIPAC to criticize Obama for willingness to meet U.S. foes. Soldier kidnapping Three Israeli Arabs charged with planning to kidnap, kill soldier.

Read & React Who didn't attend New York's pro-Israel march? Israelis Responses: 154 Doctors identify three IDF soldiers among remains handed over by Hezbollah Responses: 114 John McCain: U.S. is committed to preventing a second Holocaust Responses: 129 Barak: Hamas is exhibiting signs of distress Responses: 80 More Headlines 23:33 U.S., UN express concern over Israel's plan for 800 new E. Jerusalem homes 01:05 Olmert begins U.S. visit; set to meet with AIPAC, Bush 22:42 Doctors identify three IDF soldiers among remains handed over by Hezbollah 01:37 Natalie Portman to pitch Jewish-funded youth village in Rwanda 18:35 Three Israeli Arabs charged with planning to kidnap, kill soldier 23:56 Senior IDF officer loses 'top secret' security documents 21:56 Israel lets Israeli Arabs into Jenin for first time since 2000 01:57 With primary in sight, Kadima chiefs scurry to drum up support 23:38 Despite Shas threats, Bar On says won't increase child welfare payments 20:25 Barak says general elections this year are 'entirely possible' 23:49 Court slams gov't for preventing Gazan students from studying abroad 20:19 U.S. imam fighting deportation talks of torture in Israeli detention Previous Editions Select Day 02 jun 01 jun 30 may 29 may 28 may 27 may 26 may 25 may 23 may 22 may 21 may 20 may

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