Pension Reform – Age adjusted retirement plans
The majority of retirement plan assets across all product categories, pensions, manager’s insurance and provident funds are invested in the general or clali investment option. This typically has a balanced one-size-fits-all investment allocation, with the equity weighting ranging from 25-40%. However, the needs of a 25-year old worker just beginning his career are vastly different than the 60-year old worker with retirement only a few years away. As a result, the Insurance Commissioner proclaimed that from 2016, all retirement plans will have investment options based on age:
Under 50 years old
Between 50-60 years old
Over 60 years old
Automatic age selection
These new categories replace the general or clali investment option. However the other investment options available such as fixed income only or equity only. Interestingly, this might make it more difficult to compare returns between insurance companies or investment houses, as the long historical track records of this option comes to a screeching halt at 2016.