Finance Ministry Proposes Raise in Pension Age for Israeli Women

State-run pension funds face an actuarial crisis if nothing is done

Finance Minister Moshe Kahlon in Tel Aviv, June 23, 2019.
Moti Milrod

Israel’s seemingly endless battle over raising the pension age for women took a step closer to a final resolution on Thursday – or maybe not.

The Finance Ministry released a draft bill that would raise the age at which women are entitled to a pension from 62 to 65 (for men it is 67). The draft marked the first advance the government has made on this controversial issue since the first law on it was passed in 2004. Its implementation has been repeatedly put off.

Haaretz Weekly Episode 32Haaretz

The document was enough for Moshe Barkat, the commissioner of the Capital Market, Insurance and Savings Authority, to again delay cutting pension payments to the approximately 300,000 Israelis eligible for the so-called veteran pension funds nationalized by the government in 2003.

Faced the low pensionable age for women, the funds are struggling with an actuarial deficit that can only be closed by either raising the pension age for women or cutting payments to retirees. Barkat’s decision to delay reductions is in effect till April 2020. With this decision, the Histadrut labor federation called off a labor dispute that could have led to a nationwide strike.

However, the treasury’s draft law is by no means a sure thing. It will be up to the next government to decide whether to support the legislation; it’s under no obligation to back legislation initiated by the previous government.

Moreover, the issue of raising the pensionable age for women has been politically contentious for years. Knesset members and a host of nongovernment organizations have fought the change and they have the backing of Israeli women under the age of 60, many of whom don’t accept at face value the treasury’s warning that without raising the pension age, pension payments may have to be cut 10% or more.

Since taking office in 2015 Finance Minister Moshe Kahlon had refused to address the problem and presumably is even less inclined to now that Israel is going to a redo election on September 17.

Israel can’t put off the day of reckoning much longer. “Right now, the pension age for women in Israel is among the lowest for countries belonging to the Organization for Economic Cooperation and Development,” the treasury said last week.

“Israel is remains one of the only OECD countries where such a large gap exists between the pension ages of women and men,” it warned.

Opponents have said that if the pension age for women is going to be increased, it should be accompanied by measures to help older women in the labor market. If they have to continue working longer, then steps to fight age discrimination and other problems have be taken side by side.

Finance Ministry officials don’t disagree. A public committee, chaired by former treasury budget director Amir Levy, recommended a series of measures three years ago, including professional training and placement programs for men and women over 55.

It also proposed increasing the negative income tax program to workers over 62 and longer unemployment benefits for women 60 and older. It also proposed that older civil servants be given the option to work shorter shifts.

The idea was that these reforms would go hand in hand with a rise in the pension age for women. However, the draft law released on Thursday didn’t include any such measures.

Still, the draft reflects most but not all of the Levy committee recommendations. Among the changes was to set the pensionable age for women at 65. The committee had proposed 64 as a first stage, with the possibility of raising it later.

The treasury bill calls for a gentle rise in the pensionable age in 11 stages starting in June 2020, based on a woman’s current age. The oldest women affected are those born in June 1958, who just celebrated their 61st birthday.

If all goes according to plan, the pensionable age for women will reach 65 years in June 2030 and stay that way for several years. The next revision, according to the law, would be in 2037, when the pension age will be linked to average life expectancy.

In any event, women will still be able to retire earlier than men, even though the adjustment for life expectancy would only apply to women for now.