Israel's Finance Minister Yisrael Katz is seeking to raise the pension age for women, and has recently consulted with experts who have fully backed the initiative, including former Bank of Israel Governor Karnit Flug.
The plan's final form has yet to take shape but is to gradually raise the pension age from the current 62 to age 64 or 65.
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The idea has been raised several times, sparking strong political opposition. But this time Katz thinks that the coronavirus crisis has cleared the way for implementing the move.
Treasury officials said that the pandemic and a strong public appetite for economic reforms – after a long hiatus due to back-to-back elections – should enable them to win Knesset approval this time.
The plan would be included in the Economic Arrangements Law that will accompany the 2020 budget, which the government has until December 23 to pass or else, it will be dissolved automatically by law.
Today, the statutory pension age for men is 67, five years higher than for women, even though women statistically live longer than men and life expectancies for both sexes are rising. If the age for women isn’t raised, the government’s National Insurance Institute (social security) will be saddled with sharply increased obligations to pay for retirement allowances. Neither it, nor Israel’s pension funds, has the resources to cover the rising costs without going into deficit.
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The problem has emerged in a lawsuit brought to the High Court of Justice by members of the so-called “veteran” pension funds, union-controlled funds that were bailed out and privatized by the government in the early 2000s. Because the pension age for women was never raised as planned, the funds do not have the capital to cover all their obligations and have sought to cut allowances for their 270,000 members by 1.3%.
After a delay, the reduction was due to go into effect in January. The government is supposed to answer the plaintiffs’ case during December, a factor that is putting additional pressure on the treasury to come up with a solution with legislation on women’s pensions.
The issue dates back to 2005, with legislation to raise men’s statutory pension age to 67 from 65 and women’s to 62 from 60. That measure went into effect but plans to keep raising the age for women to 64 were repeatedly blocked by the women’s lobby.
A government committee formed in 2016 to examine the issue by Moshe Kahlon, Katz’s predecessor as finance minister, recommended the age be raised to 64, but the plan never won Knesset approval. A draft law in 2019, drawn up in response to the veteran funds’ plans to reduce allowances, sought to gradually raise the age for women to 65. The first increase, to age 64 and four months, was scheduled to occur in June 2020. Eventually, after rising to 65, the statutory pension age would go up according to average life expectancy.
That effort also failed in the Knesset.
Last week Katz held meetings with treasury exports as well as a mostly-female group of outside advisors. Apart from Flug, they include Shlomo Mor-Yosef, director general of the Population and Immigration Authority and a former National Insurance Institute director; Anat Guetta, chairwoman of the Israel Securities Authority; Rivi Beller, CEO of VeHadarta – The National Council for Advancing the Status of the Aged; and Daphna Aviram-Nitzan, director, Center for Governance and the Economy at the Israel Democracy Institute.
This group has expressed support for raising the pension age for women, but before Katz advances the plan he intends to meet with experts and others who oppose it at least in its current form. The final outline of the plan will be drawn up by Finance Ministry officials.
One of the central issues the first group has discussed is how to compensate the women most harmed by the rising pension age. They are mainly women working physically demanding jobs, such as cleaners and those in factory jobs. The advisers said the government would have to start by creating a more exacting mechanism for classifying which jobs fall under this category.
Another, smaller category of women expected to be harmed are those who have already dropped out of the labor market in expectation that their pensions will kick in when they reach 62 and would now have to wait longer. The coronavirus has solved much of this problem because many of these women are now enjoying extended unemployment benefits till next June as part of the government’s efforts to stem the economic damage caused by the lockdown and pandemic.
Although the chances of winning Knesset approval for the higher pension age are much better than in the past, Flug has proposed drawing out the process of raising the age. The increase in the first year would be just one month. Other proposals call for incentives to women, such as professional re-training and negative income tax to help women extend their working lives.