The government can no longer cut old age pensions, despite the government budget deficit and budgetary restraint. Furthermore, people making payments to the National Insurance Institute will eventually receive guaranteed old age pensions without cuts, enabling them to plan their economic future according to their families’ needs.
These are two of the basic principles underlying a comprehensive reform in social insurance proposed by National Insurance Institute director general Dr. Yigal Ben-Shalom. The reform was presented today at the Edmond Benjamin de Rothschild Herzliya Conference (the Herzliya conference) on the Balance of Israel’s National Security.
”A comprehensive reform should be implemented in the social security system. The National Insurance Law (5728-1968) should be amended, and the structure of the public and organizational system, which consists of national insurance institutions, and reflects their activities, should be revised,” Ben-Shalom stated.
Ben-Shalom proposes re-dividing national insurance payments into two clusters: insurance and social. The insurance cluster will include insurance elements for which the public pays the National Insurance Institute: unemployment, old age, dependents’, and work accident insurance. The social cluster will include allowances for which the public does not pay, and which the government pays for, such as income supplements and mobility and subsistence allowances.
Under the proposed reform, the National Insurance Institute will compose an actuarial report every five years, which will take population variables into account. The National Insurance Institute thereby hopes to avoid politically motivated decisions.
A team headed by former Ministry of Finance budget director David Brodet drew up the reform proposal. Brodet said, “During its 50 years of activity, the National Insurance Institute has been given many tasks having only a very loose connection with traditional social insurance objectives. The reform is designed to solve this defect by adopting a balanced and long-term multigenerational viewpoint.”
”In contrast to the Brodet committee recommendations, the Ministry of Finance does not believe in separating the National Insurance Institute from government policy,” Ministry of Finance deputy director Yael Andoran said today at the Herzliya conference.
Andoran added that, as an agency with macroeconomic influence that receives huge budget allocations from the state, the National Insurance Institute should be an integral part of the government’s social and economic policy, rather than operating in isolation from that policy.
Published by Globes [online], Israel business news - www.globes.co.il - on December 14, 2004