Finance Ministry Pushing 70 for Retirement Age

YERUSHALAYIM -

If the Israeli Ministry of Finance has its way, the national retirement age will be raised to 79 from the current age of 67 for men and 62 for women, The Jerusalem Post reported on Monday.

Intensive staff work has already been started to prepare a formal proposal, top ministry officials have confirmed.

“The Ministry is working on a new pension formula,” said Minister of Finance Yuval Steinitz. “This is a revolutionary reform in Israel. Instead of forcing people to retire in a single step — working full-time one day and unemployed the next — the intention is to allow people to retire gradually. This will enable people to adapt and prevent burnout.”

“The idea is to postpone the retirement age for everyone gradually. We will conduct a pilot study to offer people this program,” said a ministry official. “This is necessary. Life expectancy is rising, many 70-year olds are healthy and want to continue working. We are aware of petitions to the labor court against employers for compelling retirement.”

The Ministry of Finance says that the plan does not include cancelling the retirement age. “We don’t want for there to be no retirement age. There must be a retirement age, otherwise, some workers are liable to reach 80 and be barely functioning, at which point their employer will have to send for tests at an occupational physician and require proof which will complicate matters. There must be an age at which a worker must retire,” said the official.

Officials acknowledge that the country is not yet ready for such a change, and it will be a long-range process. “The employer must be ready for the measure and prepare for it. It is also necessary to examine for which jobs the working age cannot be extended,” said the official. “For example, a CEO cannot be reduced to a half-time job.”

A top Ministry official said that the method for gradually raising the retirement age has many advantages. “It will be possible to retain organizational knowledge and expertise without filling a new position. Sometimes, a position of five hours a day or three days a week lets an employer keep an employee with the organizational experience.”

The Ministry concedes that the plan is motivated by economics and budgeting. “There are three reasons why it’s necessary to raise the retirement age,” said the official. “On the macroeconomics side, rising life expectancy and the growth of the working-age population is falling to below 2.2%, which means less economic growth. If we’ve gotten used to 3-4% GDP growth a year, within 20 years we’ll have 2.5-3% growth automatically. You must increase the labor force.”

The second reason is the dependency ratio between retirees and the working-age population. “Today, there is one retiree for every five workers. The ratio is plummeting, and in the next decade, the ratio will be one retiree for every three workers,” said the official.

The third reason is fiscal-actuarial: the earlier a worker retires and starts to receive a pension from National Insurance, the cost is higher.