Decision-Making in Defined Contribution Pension Plans: The Case of Israel

Abstract

Research suggests that the DC saving method, which is a self-guided saving method, is a contributor to exacerbation in retirees' poverty and income inequality. Economists lobby governments to provide the public with information regarding pension savings to improve the situation, and many studies conclude that employees can improve their decisions substantially by receiving pension advice. This study analyzes Israeli data of four field studies among over 1,500 subjects and the Israeli social survey data of the Israeli Central Bureau of Statistics (ICBS). The findings of the study indicate that providing employees with information regarding pension savings does not encourage them to more pro-actively manage their pension savings nor receive advice from a professional counselor. Surprisingly, the findings suggest that employees are more willing to receive pension savings advice from a counselor on behalf of the state than from a counselor who is not necessarily on behalf of the state.

Vague Pension Future: Empirical Evidence from the Israeli Radical Privatized Market

“…Van Vliet et al (2012) hypothesize that those pension reforms that reduce public funding components have led to higher levels of income inequality and poverty among the elderly. Recent research shows that 33% of employees will be either poor or near-poor when they retire, and 55% will rely only on their social security income (Rubinstein-Levi 2021).…”