Israelis are getting older, and the State of Israel may not be ready.

By the year 2035, the elderly population in Israel, classified as over 65 years of age, will have doubled, according to projections by the Central Bureau of Statistics in 2014.

It’s the start of a demographic shift for the Jewish state, spurring calls for the state to gird financially for the expected changes to Israel’s healthcare, housing, and social services systems.

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The issue was raised again two weeks ago, when State Comptroller Yosef Shapira, in a report on Israel’s pensions system, charged that the government’s preparations for the aging population were “insufficient,” and recommended, as a first step, that the retirement age for women be raised to offset poverty rates among Israel’s elderly — which are already high by OECD standards.

Following the report, the political debate on the issue has focused largely on the retirement age and on the Israel Defense Forces’ notoriously high pensions, which have increased by hundreds of millions in recent years, according to the ombudsman.

But does the average Israeli, set to retire in the coming decades after years of employment, have cause for concern?

In 2013, Shaul Amsterdamski, then a journalist for the business daily Calcalist, published a 10-part award-winning investigative story on Israel’s pensions system, sounding the alarm about what he described as an impending crisis.

In his final piece, he underlined Israel’s aging society. “If the amount saved is the same amount, and it must be divided over more and more months, then each month we will simply receive less and less,” he wrote at the time.

“This is precisely the time for the public to wake up. To understand that there is a problem here that will explode in our faces in a decade or two, and that this is the time to start thinking together how we resolve it. There are no simple solutions,” he wrote in an appeal for greater political involvement in the issue.

But while some experts insist the government must do more to ensure Israelis can get by, others maintain the situation is not as dire as it appears, and urge a revamping of the private pensions’ investment portfolios to improve returns.

“Our situation is a much better situation than most European countries,” said Liora Bowers, the director of Finance, Operations and Policy Analysis at the Taub Center for Social Policy Studies in Israel. “Because even though we do have an aging population, even though we are having higher life expectancy — which is a good thing — overall we still have a fairly young population and we have very high fertility rates.”

Israel’s fertility rates, steady for the past 30 years, hover at around three children per woman, nearly double that of other OECD countries, she said.

“And that means in other countries, the old are getting much more numerous compared to the young and therefore there are fewer people to support an elderly population. In Israel, we still have a young population, we still have a lot of children being born, and so what we call the elderly-dependency ratio — the share of elderly that are depending on the young — is much smaller in Israel than other countries, though it is growing over time,” Bowers said.

‘Government left us to fend for ourselves’

Israel’s public pensions system is made up of the National Insurance Institute old-age allowances, set at a modest monthly NIS 1,531 (about $400) for an individual and NIS 2,301 ($604) for a couple. Israelis with no other source of income are also eligible for NII income supplements and long-term care benefits for the incapacitated. The private occupational pensions system for salaried workers includes what are colloquially known as the “old” pension funds; the “new” pension funds created after sweeping reforms in 1995, which sealed the older funds to new clients, and are defined-contribution plans; life insurance; and provident funds. In 2008, the government implemented mandatory coverage for all Israeli workers.

According to a 2016 OECD report, the government has, for the most part, successfully weaned itself off of the private pension funds, despite some support for the old pension funds and payments to workers in the public sector (including the IDF’s hefty benefits).

“Israel has a young population, but is entering a period of moderate demographic ageing. It is relatively well prepared for this, thanks to the reforms implemented since the mid-1990s, which closed financially unsustainable defined-benefit pension schemes for private and public employees and established a two-pillar pension system, with limited public financing,” it said.

“Total public spending on pensions, mainly public-sector pensions and first-pillar pensions, is relatively low and has been contained over the last decade,” the report said.

A simulation of the demographic changes until 2059, conducted by the Finance Ministry economist Assaf Geva in 2013, found an increase in spending in the public pension system. Spending on the National Insurance Institute’s old-age allowances were projected to climb from 2.6 percent of GDP in 2009, to 3.4%in 2059. The toll of long-term care benefits was also expected to rise from 0.5% in 2009, to 1.1% of GDP five decades later. The study found public spending on occupational pensions for the so-called “budgetary pensions,” which are covered by the employer and have largely been whittled down since the 1990s reforms, would drop from 2% of GDP in 2009, to 0.3% in 2059. At the same time, the public expenditures on the defined-benefit pension plans were expected to jump from 1% of GDP in 2009, to 1.9% in 2039 and remain steady for the next two decades.

According to Prof. Avia Spivak of Ben-Gurion University and a former Bank of Israel official, government spending is not the issue at hand.

“Let’s put it this way, the big problem with the pensions, with the rise in life expectancy, is not a problem for the state budget, it’s a problem for people; they will have less to live on,” he said.

Spivak was recommending greater government backing for the new pension funds, which he said could be done with a redistribution of the designated bonds in all pension accounts. In a 2013 paper, Spivak suggested increasing the percentage of bonds in the pensions investment portfolio to reduce the risks.

“In other words, to be less technical, until 2003, the state was too involved with the pension, and since 2003, the state has removed its hands from the pensions and threw us out to entirely fend for ourselves. Fending for ourselves hasn’t gone so smoothly,” he said.

But according to Bowers, the focus on bonds is part of the problem. Although Israelis are required to save “at a fairly high rate” as part of the occupational pensions, many of the plans are “a lot more in bonds and in cash, and a lot more investment in Israel versus international markets, so it is both more risky for Israelis because of the high share of investments in Israel and it’s not diversified enough, but it’s also not enough in stocks… and therefore it’s not going to give people the optimal return,” she said.

Israelis are also paying higher fees on the private plans than they would on some sort of nationalized pension plan, she said.

‘Poverty is especially high among the elderly’

A January 2016 OECD report noted that “poverty is especially high among the elderly in Israel, in part because of low basic pensions… To reduce elderly poverty, Israel should increase the generosity of basic pensions without creating work disincentives.”

According to Bowers, the two groups that suffer the highest elderly poverty are immigrants from the former Soviet Union who moved to Israel without pensions from their former jobs, and Arab Israelis, many of whom work in manual labor and must therefore retire at earlier ages. Both groups “suffered from not having private pensions and they’re really relying on Bituah Leumi [national insurance],” she said. According to the coalition agreement between the Yisrael Beytenu and Likud parties, the government must allocate resources to pay pensions to residents of the FSU.

Elderly women “are in a much more dire state, are much more likely to be in poverty in an older age than are men. So encouraging them to stay in the labor market longer is important.” Other factors, such as health, will determine how long Israelis stay in the workforce, and how dependent they are on public benefits, she said.

While stressing the need for improved investment plans, Bowers nonetheless expressed optimism.

“If you look at the amount of money we are required to put in our private pensions, occupational pensions, if we look a generation forward, those people should be okay in terms of having money because of the forced requirement of savings,” she said.