is the optimal composition of the investment portfolio in the context of the transition from classic investment channels to other channels ( direct credit, real estate ), and in the context of the diversification of investments abroad? – what effect does the tension between the short - term measurement method of the plans ’ achievements and the need to create long - term yields and repayment abilities, which is what is relevant to the saver, have? does the method of measurement not create short - term competition, which is not necessarily optimal? – what is the proper extent of the investment portfolio ’ s exposure to investments abroad and to foreign currency? financial education : – what is the proper balance between the decisions of the individual and regulatory intervention? – what are the tools that need to be provided to the public in order for them to make informed decisions about their pension savings? questions for research : – can we estimate the effect of savings enforced by the mandatory pension law on developments in various markets ( household credit, and so forth )? – how does mandatory pension affect total savings? – how can we balance the need to direct long - term savings to support for business sector growth and the maintenance of a reasonable level of certainty for retirement age? in summation, the institute currently being launched has a great deal to do, both in the field of broad empirical research and in the field of research on questions of policy. the activity to increase the public ’ s financial literacy will help all of us make informed decisions regarding the question that is perhaps the most important in the area of household financial decisions. i wish the people of this institute success in your important endeavors, and i await the opportunity to learn from the fruits of your labor. bis central bankers ’ speeches

karnit flug : challenges in the field of pension savings remarks by dr karnit flug, governor of the bank of israel, at the pensions, insurance and financial literacy research center, ben - gurion university, beer - sheva, 20 november 2014. * * * good morning, the festive opening of this institute is a very important event, and its work plan seems promising. there is tremendous importance to raising awareness and research on the matter, and action in this direction is to be welcomed. it is also important to improve the public ’ s ability to make an informed decision in this field as this is one of the most important financial decisions a household makes. i therefore see tremendous importance in working on financial literacy. i would like to briefly touch upon a number of facts and trends that point to the challenges in the field of pension savings, and then to present a series of questions that i believe are proper to deal with in an institute such as this. projected demographic trends as we know, life expectancy is increasing, and if we look at the past 40 years, the life expectancy of those reaching age 65 increased from 80 years to 86 years for women, and from 79 years to 84 years for men. this fact, together with the fact that the retirement age increased by only two years, means that men are expected to live an average of 17 years after retirement and women are expected to live 24 years after retirement. this leads to the question of whether, during the working period, the public is saving enough to ensure a proper income at retirement age. another way of looking at the demographic change is to look at what is happening to the ratio between the working - age population and the retirement - age population. the trend in israel is similar to the trend in other countries in the world, although with some lag. as of today, there are 5 working - age people for each person over age 65 in israel, while the ratio in 2050 is expected to narrow to 3 : 1. this change obviously has serious implications for the labor market, the dependency ratio, and various aspects of policy. an international comparison of retirement arrangements shows that in israel, the retirement age for women is relatively low, and even after it is raised to 64, as is supposed to happen in 2017, it will be significantly lower than in most european countries, some of which are also in a gradual process of raising it. the retirement age for men in israel was raised to 67, and