Good news for men, but not for women, in new pension funds
Surprisingly, updated actuarial tables and longer life expectancy benefit men.
Good news for men who have saved in the new pension funds: There is a very good possibility that their pensions will rise in the near future.
This is a result of the rise in life expectancy, along with the intentions of the Finance Ministry's supervisor of pensions to update the old actuarial tables used by the pension funds to correct for recent changes in death rates and life expectancy.
But at the same time, the situation for women is less rosy. Their pensions are expected to go down after the changes take effect.
The issue of updating the actuarial tables has been under examination in the treasury for more than a year, and the decision to update them due to increases in life expectancy has already been made.
Until now the assumption had always been that the increase in life expectancy would lower pensions across the board - logic would seem to dictate that the longer you live after retirement, then the same total amount of pension savings would have to be divided over a greater number of years of life. And so the smaller the monthly pension.
But it turns out that greater life expectancy also has another effect, one that offsets the first. It also reduces the probability that a pension fund member will die young, before reaching retirement age.
In that case the pension funds need to spend less on life insurance for dependents, and a larger amount of the fund's income can be used for savings and investment instead of buying life insurance. Increased savings and investments by the fund mean more money for pensions when the member actually retires.
Longer life expectancy, therefore, actually will increase the amount saved for pensions, even though it also means dividing this sum up over a greater number of years.
While the two factors offset each other somewhat, the effective result depends significantly on the number of years left before retirement, combined with expected life span.
Young members, who have a long time till retirement, have the best chance of benefiting from the change; while older people, closer to retirement, can expect to see their pensions cut.
Men also have an advantage over women, since men have lower life expectancies.
The most likely scenario is that most men who save for their retirement in one of the new pension funds will see their monthly pensions go up. Women will probably suffer the opposite effect - most women in these funds will see their monthly pensions cut.
In response to this report, the Finance Ministry said that the examination of the use of the new actuarial tables by the pension funds, as well as the effects of such a change, is still ongoing, and declined to comment for now.
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