Study: Israeli household income plummets after retirement

When compared to developed European countries conducting similar surveys, based on data provided by SHARE, Israeli retirees suffer a greater decline in income than their European neighbors.

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August 19, 2019 18:34
2 minute read.
Study: Israeli household income plummets after retirement

Prof. Avia Spivak of Ben-Gurion University of the Negev's Pensions, Insurance and Financial Literacy Center. (photo credit: DANI MACHLIS/BEN-GURION UNIVERSITY OF THE NEGEV)

The average income of Israeli households plummets by more than one-third upon retirement, a new study has revealed, leaving pensioners with lower incomes than retirees across almost all developed European countries.

According to a new study carried out by Dr. Aviad Tor-Sinai and Prof. Avia Spivak at Ben-Gurion University of the Negev’s Pensions, Insurance and Financial Literacy Center, income after retirement among Israeli pensioners stands at 65.9% of their pre-retirement income

The dramatic decline by age 67, just two years after retirement, includes income from all sources: labor, pension plans, social security, and capital income.

When compared to developed European countries conducting similar surveys, based on data provided by SHARE, Israeli retirees suffer a greater decline in income than their European neighbors.

Austrian pensioners, for example, enjoy 91.2% of their pre-retirement income; French pensioners retain 83.1% of their previous income; and Germans continue to earn 76.8% of their income. Only Spanish retirees, the researchers said, earn an inferior proportion of 63.3% of their pre-retirement salary.

“In general, the whole Israeli system is less generous than in European countries,” Spivak, who has served on a pension fund board for more than a decade, told The Jerusalem Post.

“Although the pension is a major part, all the income is less generous. Social security in Israel is meagre in comparison to social security in France, Italy, Germany and Sweden, for example. The occupational pension is also smaller. What Israelis often do is many of them keep working, and the figures include income from work.”

Among residents of countries with a Continental European social welfare model, including Germany and France, average post-retirement income stood at 79.8%, the highest among all models. Retirees in Mediterranean countries, such as Spain and Italy, only received 68.8% of their previous income on average.

“The first part of the solution is collecting information and knowing what is going on in the country,” said Spivak. “In Finland, they collect data, they know where the pension system is going, they have good projections of future incomes. In Israel, the authorities have none of that information.”

The publication of the research was timed to coincide with the launch of Ben-Gurion University’s new program offering a diploma in actuarial studies and risk management.

The one-day-a-week program, Spivak said, comes in response to growing demand for data analysts in the field of actuarial science, and aims to prepare graduates to serve as financial analysts, actuaries, and risk managers. The program targets graduates of economics, business management, and accounting.

Due to accept its first students in November, the three-semester program will include eight courses, including financial and actuarial risk management; financial stress testing scenarios; advanced actuarial forecasting methods; empirical tools for managing and assessing risk; and mathematics.

“We have lots of people who have an undergraduate or masters degree in economics, but we are really lacking people who know the hardcore business of risk management and all the probability theory, related to risk of death and disability,” said Spivak.

“You have millions of people who can manage stocks and bonds, and can talk the language of margins, but this is really missing. A good pension infrastructure is what we need in Israel.”


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