Israeli Panel Proposes Raising Women’s Pension Age by Three Years to 65

Increase would come gradually over 12 years and include other components to ease the transition for older women.

Women working at an Israeli factory.
Yaron Kaminsky

A new battle over whether Israel should be raising the pension wage for women is about to get underway after a treasury committee this month quietly proposed that the retirement age be set at 65, and perhaps even higher.

That would mean an increase of three years from the current age, 62, that Israeli women are entitled to collect pension benefits and an old-age allowance from the National Insurance Institute. It’s also the earliest age at which a worker can be forced by her employer to retire.

The pension age for Israeli women is among the lowest for countries belonging to the Organization for Economic Cooperation and Development, and is five years under the age for Israeli men. The age for Israeli woman was raised to 62 from 60 in 2004, but with life expectancies rising quickly – adding to the cost of pension payouts – experts have warned that another increase is long overdue.

Efforts in the past to raise it encountered stiff political opposition, most recently in 2011, when the Knesset blocked a treasury plan. Last March Finance Minister Moshe Kahlon put Amir Levy, head of the treasury’s budget division, in charge of a panel to re-examine the issue.

The recommendations the Committee for Examining Women’s Pension Age is proposing would administer the shock gently. The increase in the retirement age for women would rise to age 65 over a 12-year period, enough time for women who are approaching age 62 not to suddenly find themselves facing three more years in the workforce.

The committee also proposed that when the pension age reaches 64, officials re-examine the need to increase it to 65, based on factors like the labor-force participation rate and the value of pension benefits.

On the other hand, once the pension age reaches 65 for women, the Levy committee proposes that an auto-pilot mechanism be put into place that sets future pension ages by criteria like the labor-force participation rate of older women, life expectancy and income levels.

Rising the pension age would have some financial benefits for women. Right now, the average monthly pension benefit for a women retiring at age 62 is 3,494 shekels ($929) a month plus whatever money she is entitled to from the NII.

Raising the pension age by three years will increase the monthly payout to an average of 4,079 shekels. If the retirement age is pushed up to 67, the monthly benefits will be 5,136 shekels. It was this big difference that caused treasury officials to push for moving the retirement age to 67, but the committee rejected the idea.

In addition to the proposal for raising the pension age, the panel has also proposed allocating 1 billion shekels over 10 years for helping women who are hurt by the change. That would be used as income support for women, mainly ages of 62-63, who are working but aren’t entitled to an old-age allowance.

Together with other categories of women who would be negatively affected, the total population that would be due assistance amounts to about 12,000 every year.

Another problem is ensuring that older women can continue working as the new, higher pension age gradually kicks in. For them, the Levy committee has proposed training programs, with a budget of 300 million shekels, to teach them new job skills or how to start a small business. For women over 60, the panel is proposing extending the unemployment benefits they’re entitled to by 10 months.

Other proposals for helping older women in the workforce is by increasing the so-called negative income tax to women who continue working to age 62.

The criticism of the Levy recommendations is likely to focus less on the age issue than on money budgeted for the women affected. Among other things, the committee failed to address the issue of women who have been full-time housewives and who haven’t paid into the system.

The treasury expects to get Knesset approval for the changes by January, but that may be optimistic because of opposition from MKs including Shelly Yacimovich (Zionist Union). The stance of Moshe Gafni (United Torah Judaism), whose Knesset Finance Committee will vet the legislation, isn’t yet known.