Israeli Retirement Ages Explained
In Israel, the official retirement ages differ for men and women and are subject to legislative changes. This tiered approach impacts retirement planning, pension entitlements, and financial security for older Israelis.
Retirement Ages for Men and Women
For men, the retirement age is set at 67, making them eligible for a state old-age pension from the National Insurance Institute (NII or Bituach Leumi) if they meet income test requirements. For women, a law passed in November 2021 is gradually increasing the retirement age from 62 to 65, phased in between 2022 and 2032. The increase adds three to four months each year, with the exact age depending on the birth date. For instance, a woman born between January and December 1965 will retire at 63 and nine months, while those born in or after 1970 will retire at 65.
Mandatory vs. Early Retirement
The mandatory retirement age, at which an employer can require an employee to retire, is generally 67 for both men and women. However, this can be altered by collective agreements or employment contracts. Early retirement is also an option, allowing individuals to receive a reduced NII pension starting from the early retirement age. The specific age and reduction percentage depend on various factors.
The Impact of the Women's Retirement Age Increase
The increase in the retirement age for women aims to improve the sustainability of the state's pension system and promote gender equality. Israeli women have a higher life expectancy, and retiring earlier previously strained pension funds. Extending their working years can potentially increase their pension benefits and help close the pension gender gap. Measures to support women during this transition include extended unemployment benefits for those over 60, vocational training, and increased employment subsidies for low-income women.
Israel's Multi-Pillar Pension System
Israel's retirement income system has three main pillars.
- National Insurance Institute (NII) Old-Age Allowance: This is a state-provided basic allowance based on reaching the conditional retirement age and meeting an income test. Individuals over the absolute retirement age of 70 receive a basic allowance regardless of income.
- Mandatory Occupational Pensions: Since 2008, employers and employees must contribute to pension funds. The pension amount is based on total contributions over the career.
- Voluntary Contributions: Individuals can make extra contributions to private pension funds to supplement their other benefits.
Factors Influencing Pension Income
Several factors influence retirement income in Israel. A Taub Center study highlighted the gender pension gap, with women typically receiving lower occupational pensions due to various reasons.
| Factor | Impact on Pension Income | Notes |
|---|---|---|
| Salary Levels | Lower average salaries for women mean smaller pension contributions. | This is a major factor in the gender pension gap. |
| Maternity Leave | Time off for maternity leave can reduce the total period of pension contributions. | This can affect overall pension savings. |
| Early Retirement | Retiring early results in a smaller pension payout. | Delaying retirement can significantly increase occupational pension income. |
| Life Expectancy | Women's longer life expectancy means pension savings are divided over more payments, leading to lower monthly amounts compared to men with similar savings. | This impacts monthly income despite similar savings. |
| Contribution Consistency | Consistent employment and higher earnings lead to larger pension funds. | Gaps in employment reduce the final pension amount. |
The Role of Individual Choice
Individual decisions significantly impact retirement outcomes. Many Israelis work past the conditional retirement age to increase pension savings and receive a higher NII allowance, which can increase by up to 5% for each deferred year. This is often done to supplement occupational pensions. Conversely, some choose early retirement if financially feasible, accepting a lower pension. The NII website offers resources, including calculators, to help estimate retirement benefits.
Conclusion
The average retirement age in Israel is dynamic, with the official age for men at 67 and women's age gradually increasing to 65. The system is based on state allowances and mandatory occupational pensions. A pension income gap exists between genders, partly due to life expectancy and career differences, though reforms are in place. Retirement security ultimately depends on government policy, mandatory savings, and individual planning.
