BOI: Reforms may impact retirement plans

By DANIEL KENNEMER
February 23, 2006 07:23

According to Bank of Israel researcher Yuval Mazar the situation would keep men's benefit on retirement stable, though women were expected to lose benefit.

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Research released by the Bank of Israel Wednesday indicated men will retire at a slightly later age than at present while women likely will keep their retirement age stable, given the effect of recent reforms. According to Bank of Israel researcher Yuval Mazar the situation would keep men's benefit on retirement stable, though women were expected to lose benefit. Mazar predicted the effects of reforms introduced in the last few years and the switch to contributory pension schemes through a simulation. The finding was based on the assumption that the average age at which women begin working would remain the same as in the period studied. If their age of entry into the labor market continues to fall as it has recently, their benefit is not expected to suffer, Mazar said. The study also found that despite the increases in the legal retirement age, the average age of retirement in the public sector has declined steadily since 2001. "This is the result of an increase in the compensation paid on early retirement via more generous granting of extra job grades on retirement, and by employees' greater concern regarding a worsening of the terms of their retirement due to the recently implemented reforms," Mazar said. Mazar found that although the legal retirement age since the 1980s was 65 for men and women, and women could retire at 60, only half of the employees retired at the compulsory retirement age, and the rest at an earlier age. Most of the employees who took early retirement had accumulated their maximum pension entitlement, or were given an incentive to retire early through special grants or in campaigns to encourage early retirement. It was also found that low-wage earners and employees without higher education tended to retire at an earlier age. For this group, the proportion of wage counted towards pension is higher, making early retirement "a more attractive alternative," the study found. Mazar found that employees in the top salary quintile settled for relatively smaller proportion of salary on retirement than those in the lowest quintile. It was also found that women are prepared to waive a higher share of their salary on retirement than men, similar to studies abroad. - D.K.


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