NII Payments Going Up for First Time in Five Years

Ruth Sinai
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Ruth Sinai

National Insurance Institute payments will increase this month for the first time in five years, but by only half as much as they would have been had the Finance Ministry not changed the updating mechanism, the NII said yesterday.

Most NII payments will grow by 2.7 percent this month, though old-age allowances and widows' stipends will grow by only 1.8 percent. But according to the NII's research and planning administration, had the updating mechanism not been changed, payments would have risen by 6 percent.

Until 2001, most NII payments were linked to the average wage. Only child allowances were linked to the Consumer Price Index instead. But in 2002, the government decided that all NII payments would be frozen until January 2006 and thereafter linked to the CPI instead of the average wage. The NII believes that the new updating mechanism will make poverty more widespread, and it therefore urged the treasury to return to the former system.

The institute explained that under the old system, most stipends were calculated as a percentage of the average wage. Since the average wage today is 6 percent higher than it was when the freeze was imposed, most payments would have risen 6 percent this month if that system were still in force.

Under the new system, however, stipends are updated every year according to the increase in the CPI over the previous year. Since the CPI rose only 2.7 percent last year, payments will increase only by that amount.

Old-age allowances and widows' stipends will rise by less than the other payments because unlike all the other allowances, they were updated last year as well, by 0.9 percent. The NII has asked the government to nevertheless increase these payments by 2.7 percent this year, but thus far the government has refused.

In the treasury's view, linking NII payments to the CPI makes sense, because that ensures that the stipends maintain their purchasing power. But in the NII's view, the payments are also meant to allow recipients to benefit from any increase in the overall standard of living, as reflected in the average wage.



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