|
|
Old Age Pensions to Fall 15-20%
By Eran Peer, Globes
Israel
April 13, 2005
Sources inform "Globes" that the Ministry of Finance capital markets, insurance and savings division plans to change the mortality generation used by the new pension funds (established on or after January 1, 1995) from 0.5% to 1.25%.
This will cause a sharp drop, estimated at 15-20% in the rights of members of the funds, and in the pensions based on those rights.
The cut in rights is the third in three years, with the cumulative pension cut totaling 38-45%. The first cut was in October 2002, when mortality tables used by the pension funds were revised, cutting members' rights by 19%.
In January 2004, the pension funds became ''yield type'' pension fund (i.e., a fund in which members' entitlements are derived from the accrual of moneys in their personal accounts and in which entitlements vary on a current or a periodic basis commensurate with the accrual trend). The proportion of designated funds fell, and their yield was cut. This reduced pensions by 10-15%. Now mortality generation is being revised.
Mortality generation is the actuarial assumption about the expected rise in life expectancy in population segments. As life expectancy rises, the fund must pay pensions to its members for longer periods. Since the new pension funds are legally required to remain actuarially balanced, an increase in mortality generation will directly reduce members' rights.
The Ministry of Finance said in response that the capital markets, insurance and savings division regularly examines actuarial assumptions but that nothing had been decided yet.
|
|
