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Israeli pension reform possibly costly to banks




 June 11, 2003

Israel - The “Yediot Ahronot” Hebrew daily reports that the pension reform is liable to prove costly to the banks, due to their streamlining programs in recent years, which included allowances for the early retirement of hundreds of employees. The reform could cost some of the banks hundreds of millions of shekels in added costs. Other major employers are also liable to incur these costs.

The Benefit pension consultancy estimates that the pension reform will cost employers an average of NIS 100,000 for each employee receiving early retirement.

Under early retirement, the employer pays the retiring worker the allowance he gets upon retirement. When the employee reaches retirement age, the pension fund takes over the payments. Following the raising of the retirement age, employers will have to pay workers retiring before retirement age for longer periods, until they reach pension age.

Benefit also stresses that employers will not be affected in every case of early retirement. Where the banks are concerned, however, it is feared that they will have to make additional payments in most early retirement cases.

The banks said in response that they were considering the matter.

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