Improving the pension system and the welfare of retirees in Israel

Israel is a young country with still dynamic population growth, but it is already beginning to face the consequences of population ageing. The pension system relies largely on mandatory private retirement saving, which will moderate the long-term fiscal impact. Yet, there are questions about the fairness of the pension system, given the regressive nature of some of its tax provisions, its ability to effectively protect the most vulnerable elderly, whose poverty rate is high, as is the case for the rest of the population, and its efficiency in securing and valuing these retirement savings to guarantee pension adequacy. This review examines ways forward for policy to address these issues by reinforcing the protective role of basic pensions, by encouraging people to work longer and by improving the fairness and effectiveness of the system’s second pillar. This Working Paper relates to the 2016 OECD Economic Review of Israel (www.oecd.org/eco/surveys/economic-survey-israel.htm).