Pension Experts Criticize Treasury Plan to Cut Contributions
Translated & summarized from Globes by baba
Pension experts are criticizing a Ministry of Finance plan to reduce mandatory pension contributions, warning it could significantly lower Israel's global pension system quality rating. The plan aims to boost household income but could lead to smaller pensions in retirement, potentially reducing them by approximately 2,000 shekels per month. Despite these concerns, Israel's pension system is currently ranked fifth globally with an 'A' rating, though its adequacy score is its weakest point.
The story in 6 lines · by baba
- Pension experts warn a Treasury plan to cut contributions could lower Israel's global pension system quality rating.
- The proposed plan aims to increase household net income by reducing mandatory pension contributions.
- Professor Dan Weiss stated the plan would harm the replacement ratio, leading to smaller pensions.
- Israel's pension system is currently ranked fifth globally with an 'A' rating in the 2026 Global Pension Index.
- The adequacy of pensions in Israel is its weakest point in the global ranking, potentially worsening.
- Naomi Gisser of Marsh Israel stressed the need for improved post-retirement income provisions.
Pension experts are warning that a proposed plan by the Israeli Ministry of Finance to reduce mandatory pension contributions could significantly lower Israel's global pension system quality rating. The plan, which aims to increase household net income and consumption by reducing contributions, is also supported by the National Economic Council, which has suggested eliminating mandatory contributions until age 40. Professor Dan Weiss, head of the Harel Center for Capital Markets Research at Tel Aviv University, stated that the proposed changes would harm the replacement ratio, meaning that lower savings at a younger age will result in smaller pensions later in life. He also noted that the plan could negatively impact young parents during maternity leave, a period when they are not working.
Despite these concerns, Israel's pension system currently ranks highly in the global pension index, achieving an 'A' rating with 81.9 points in the 2026 Global Pension Index by Marsh and CFA Institute, placing it among the top five countries worldwide. The index evaluates a system's adequacy, sustainability, and integrity. While Israel scores well in sustainability (4th globally) and integrity (9th globally), its adequacy score, which measures whether pensions provide sufficient retirement income relative to pre-retirement earnings, is its weakest point at +B (14th globally). A further decline in this area could negatively affect Israel's overall ranking.
Naomi Gisser, CEO of Marsh Israel, acknowledged Israel's significant achievement in the global ranking but emphasized the need for improvement, particularly concerning post-retirement income. She advised employers to consider future needs and adapt their pension arrangements accordingly, viewing pension planning as a crucial aspect of organizational risk management.