There were plenty of numbers flying around during Eyal Ben-Chelouche's press conference yesterday, when the commissioner of Capital Markets, Insurance and Savings presented the treasury's plan "for rescuing the pension funds."
The main biggies were:
l NIS 137.5 billion - This is the actuarial deficit run up by 12 pension funds managed by the Histadrut. Deficit - as in the sum they are short of in order to pay out promised pensions to their members. Leaving the deficit alone without attempting to resolve it would only shift the problem onto the next generation, who will have to pay the bills. The latest plan is based on this vast deficit, but tweaked and tuned according to various discounts, which could raise or lower the deficit by billions. Any disagreement between the treasury and the pension funds is not about the fact that they have a whopping deficit, but about its actual size.
l NIS 67.4 billion - This is the sum the government must inject to keep the funds going until 2008. In practice, the treasury knows it will have to take on board the pension payments of these funds' members but, for the meantime, it is worrying over the price tag. In talks to be held between the government and the Histadrut, this will be the treasury's opening offer, based on which it will demand quid pro quo from the workers. Part of this NIS 67.4 billion will come from gradually phasing out the subsidies it provides the funds through the issue of specially designated bonds.
l 67 - This is the new age of retirement for both men and women covered by the veteran pension funds, as recommended by Finance Minister Benjamin Netanyahu's boys. Raising the age will be phased in gradually, to be completed for men by 2009 and for women by 2024. Raising the retirement age will both encourage more (older) people to work, and increase their contributions to their pensions, while postponing the pension payouts.
l 20.5 percent - This will be the level of contributions into the pension funds. Current rates are 5.5 percent of wages from the worker and a further 12 percent on the part of the employer. This will be increased by 3 percent, split 2:1 worker:employer. This will mean workers' take-home pay will shrink by a further 2 percent, while the cost of wages to the employer rises 1 percentage point.
Other than the figures, the pension revolution is based on two further planks: replacing the management of pension funds suffering heavy actuarial deficits, and equating rights of the pensioners.
All these steps will help to bring a final halt to the worrying liabilities the pension funds have imposed on themselves, and will prevent further shenanigans and manipulation that allows workers to enjoy higher benefits than they deserve, at the taxpayers' expense.
The newly appointed fund managers will be able to carry out retroactive checks on agreements that the pension funds have reached where the pensioners received exceptional rights and payments. For example, some components of pay are not included in pension calculations, but for some individuals, their pensions have taken these components into account.
And, while a discount here and a discount there could be up for debate, there is no shying away from the fact that, unless a firm hand takes control over the funds' commitments, no rescue plan will cover that actuarial deficit.
Only an appointed manager, free of Histadrut patronage, and not influenced by workers' unions, can put the brakes on the humongous growth in commitments.
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