Retirement Age for Women Will Stay at 62, Lapid Now Says

At a key budget meeting last week Finance Minister Yair Lapid said he had reversed his stance on raising the retirement age for women and now opposes raising it from 62 to 64. Senior ministry officials and representatives of the Bank of Israel at the meeting reportedly greeted Lapid’s shift with astonishment and anger.

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Lapid explained that he changed his opinion after consulting with business leaders and women’s organizations. The Finance Ministry had planned to raise the retirement age for women to 64 as part of the state budget for 2013-2014 and to gradually raise this age to 67 years in succeeding years. Lapid’s shift will put an end to this proposition.

Deputy Bank of Israel Governor Karnit Flug and top staffers in the Finance Ministry’s budget division were among those at the meeting. Efforts by attendees to persuade Lapid to back down were fruitless, sources at the meeting said. Treasury officials reportedly decided not to go public with Lapid’s announcement or the vociferous discussion it prompted.

Lapid reportedly said he changed his mind after consulting with senior business figures and representatives of organizations such as the Israel Women’s Network and Na’amat, the women’s organization associated with the Histadrut labor federation.

Before such a major step as raising the retirement age for women is taken, Lapid reportedly argued, it is important to look at the constellation of factors at work in the economy with respect to the employment of women. He also reportedly said the government cannot take such a step unilaterally.

Women’s organizations argue that because women, especially older individuals, face discrimination in the workplace allowing them to retire early is good policy.

Under former Finance Minister Yuval Steinitz the treasury lobbied to raise the retirement age for women. Women’s organizations vigorously opposed the proposal, which failed resoundingly in a December 2011 Knesset vote. All female MKs opposed the measure, as did the chairman of the Knesset Labor, Welfare and Health Committee, MK Haim Katz ‏(Likud‏), who has retained his post in the new government.

Parliamentary observers believe that all 27 current female MKs, including the eight from Lapid’s own Yesh Atid party, want to keep the retirement age for women at 62.

The retirement age for men in Israel, 67, is among the highest in the West. Under the current law women may choose to retire after turning 62 but they can continue to work until age 67. After retiring they are eligible for old-age benefits from the National Insurance Institute. The anticipated rise in the minimum retirement age for women would save the NII a lot of money.

The National Insurance Institute has been struggling financially for a number of years since the treasury began siphoning off much of its funding. In practice the Finance Ministry turned the agency into a secondary source of government revenue. On the other hand, for years treasury officials have sought to raise retirement ages in order to ease the NII’s financial troubles. Ministry officials argue that the retirement age for men and women should gradually be equalized since the life expectancy of women has risen even more than men’s. Israelis have among the highest life expectancies in the world.

The effort to raise the retirement age for women has had the strong support of the Bank of Israel and especially that of Flug. She and Bank of Israel Governor Stanley Fischer have warned that failure to raise women’s retirement age would cause actuarial problems for the NII and for pension and provident funds because they would be forced to pay out higher amounts due to women’s rising life expectancies.

A senior source in the central bank said Lapid’s shift on the issue points to his lack of political experience, adding that the former journalist has surrendered to lobbyists and other special interests.

Bank of Israel officials note that there is currently one retiree for every five active workers in Israel. According to central bank projections, within a number of years this ratio will drop to one retiree for every three workers unless the retirement age for both women and men is raised, eventually, to 70. The NII and Israeli pension funds, bank officials say, cannot support the lower ratio.