Financial Illiteracy, Irrational Thinking Prevents People From Saving for Retirement​

​Dr. Ravit Rubinstein-Levi and Prof. Haim Kedar-Levy, 2019

Most people in Western countries fail to plan sufficiently for retirement, two BGU researchers have claimed in a new study. As a result, most OECD countries will be faced in coming years with large social security expenditures to support aging populations at a time of expanding life-expectancy.​​


The conspiratorial style in lay economic thinking

David Leiser, Nofar Duani, Pascal Wagner-Egger, 2017

This study investigates patterns of lay perception of economics, and in particular the place of conspiratorial thinking regarding the economic domain. We devised four types of accounts in the economic domain, over a range of questions regarding different aspects of the economy: the classical neo-liberal economic view, and the Conspiracy view, to which we added the Government malfunction view, and the Bad Invisible Hand view. The last two views are the ones most strongly endorsed by our respondents, in the US, Israel and Switzerland. The pattern of inter-correlations between the four accounts, and that between each and the psycho-social variables we examined, exhibits two clusters, Econ101 vs. the other three views of economy. This corresponds to a general opposition between people who trust the neoliberal economic system, and those opposed to it. What sets economic conspiratorial thinking apart are its links with other conspirational beliefs and with paranormal beliefs.




Differing conceptions of the causes of the economic crisis 

David Leiser, Rinat Benita, Sacha Bourgeois-Gironde, 2016

We report findings from a survey regarding the lay perception of the causes of the world-wide economic and financial crisis. Respondents (N= 2245) from a variety of countries were included: China (Hong Kong) Turkey, Russia, Israel, Germany, USA, and France. We show that respondents from Western World countries, who were unaffected by the crisis and have economic training, interpret the crisis differently from all other respondents (i.e., those living in Turkey, Russia, or Hong Kong, and those who were personally affected by the crisis or without economic training). These differences have important implications on how policies are perceived and evaluated by the public, and should inform how they are presented to the public.


Journal of Economic Psychology


There is no annuity puzzle in the DB system: annuity– preferences and psychological factors in Israel

Omer Selivansky, David Leiser, Avia Spivak, 2016 


Contrary to the optimal decision is to invest most of the retirement savings in annuity withdrawals, studies shows that in practice, most retirees prefer a lump-sum withdrawal. This discrepancy is dubbed the “annuity puzzle”. The current study examines the withdrawals preferences of the population of Israel and the psychological and demographic factors that affect them. Unlike findings from other countries, most of the subjects preferred annuity withdrawals over the lump sum withdrawal. The level of confidence in the system was found to significantly affect the withdrawals method decision, with lower confidence associated with lump sum withdrawals preferences. In addition, it is apparent that high self-confidence is associated with a preference of the lump sum withdrawal, and that age is positively correlated with preference for annuity withdrawals.


In Review


What Determines the Credibility of the Central Bank of Israel in the Public Eye?

Zeev Kril, David Leiser, Avia Spivak, 2016 

In line with the rational expectations’ approach, economists emphasize transparency as a key factor for Central Banks’ credibility. In this paper, a psychological approach yields different results: trust in the Banks’ policy is associated with the professionalism and independence of the Bank and not with its transparency. It is a subtle difference: transparency is indeed a positive factor in the overall perception of the Bank as trustworthy, but a statistical analysis shows that not all aspects of perception are relevant to trust in the Bank’s credibility in its inflationary policy.


International Journal of Central Banking


Facing a biased adviser while choosing a retirement plan. The impact of financial literacy and fair disclosure

Eyal carmel, Dana Carmel, David Leiser, Avia Spivak, 2015

The aim of the present study was to explore the effect of the advice given by an insurance agent, along with that of two further factors: a fair disclosure statement regarding ‎the agent’s ‎conflict of interest, and the customer’s degree of financial literacy. Two experiments conducted among undergraduate students in Israel showed that customers ‎mostly ‎follow the agent’s recommendation, even against their best ‎interest, and despite the presence of a fair disclosure statement.  Only participants with high financial literacy, who received a disclosure statement, did examine the alternatives closely and rejected the advice when the recommendation was damaging. We also ruled out the existence of a negative psychological reactance response to a disclosure statement that would work to the detriment of financially literate participants.


Journal of Consumer Affairs


Mendatory Pension in Israel – How Inequality among Retirees has Changed (Hebrew)

Shachar Zemach, Avia Spivak 2015

The obligatory pension applied to the market in early 2008 is designed first and foremost to reduce the rate of inequality and poverty in the retired population. By analyzing a database obtained from a large pension fund, the impact of reform was examined. The findings show that the insurance coverage applied to the whole population of salaried workers, reduced the inequality index in Israel between the years 2008 and 2012. However, early withdrawal of funds places at risk the size of the allowance and could undermine the success of the reform.


Research Synopsis, the Pensions, Insurance, and Financial Literacy Research Center


The Crisis in the Non-Bank Credit of 2009 (Hebrew)

Avia Spivak, 2014

This work documents the creation of the non-bank credit market in Israel and the failures discovered “loud and clear” during the global economic crisis. The work describes the ills characterizing this market, but also indicates that the diversification of credit sources for the business market contributed to the stability of the banks and allowed them to increase capital requirement. The work relates to the Chodak Committee’s recommendations, examining the contribution of the current pension structure to the stability of the local financial market, and tries to derive lessons from the global crisis and its implications for Israel.


Published as part of a collection of essays – a view of the economic crisis: An Israeli and an international perspective. Economics and Society Program at the Van Leer Jerusalem Institute


Pension as an Allowence or a Onetime Capital Withdrawal? Preferences and Psychological Factor (Hebrew)

Omer Selivansky, 2014

Two central drawing products of pension savings are the onetime capital withdrawal for independent management of savings by the pensioner, or the annuity, namely, obligation of the pension fund for monthly payment for the rest of the pensioner’s life. While the annuity has many advantages, many people prefer to withdraw the whole sum of money, known as “The Annuity Puzzle”. The study examined the extent of the phenomenon in Israel and the influence of personal characteristics on saving preferences.


Research synopsis, Insurance and Financial Literacy Research Center


Choose Today for Tomorrow’s Sake: the Insurance Agent’s Influence on Selecting a Track for Pension Savings (Hebrew)

David Leiser, Avia Spivak, Eyal Carmel, 2013

Choosing a pension fund is one of the most important economic decisions that a person makes during his lifetime. In the pension marketing policy in Israel, a person usually chooses a pension plan when meeting with an insurance agent, who may have a conflict of interest. The study looked at whether the pension plan choice related to the recommendation of the insurance agent and how the proper disclosure provided by him and the level of financial literacy by the person in receiving the decision affected the decision.


The Economic Quarterly


Pensions in Israel and Abroad: Main Developments Approaches and Ideological Influences (Hebrew)

Avia Spivak, 2013

This article was published as part of a series of economic disputes in order to differentiate between facts and opinions in the field of pensions. The public debate on the pension system is very complex, both because of the complexity of pension arrangements and because of its ideological aspect. The article first presents the basics of pension economy, followed by the central disputes in this subject, some of which are ideological and others pragmatic.


*Published as part of the series “Disputes in Economy” as part of the Economics and Society Program at the Van Leer Jerusalem Institute


Barriers to Retirement Savings in Israel (Hebrew)

David LeiserEyal Carmel2012

The review was written upon request from Israel Consumer Council in order to examine the barriers to retirement saving in Israel. The report examine well-known psychological features, which impair long-term financial decisions. Following be an examination of the problem of the conflict of interest that characterize the pension selection process in Israel, and determine the impact of low level of financial literacy in the population. The review presents research findings from the academic literature, and from studies conducted in the Economic Psychology Lab at the Ben-Gurion University of the Negev.


A Review for the Israeli Consumer Council


The Effect of Expected Changes in Future Income on Consumption (Hebrew)

Omer Glass, 2012

Many studies have indicated that lack of financial literacy harmed the ability of individuals to make and carry out rational financial decisions. The present study examined the question: “How does the individual respond to changes in his expected income in the event that it is known to him?” The findings showed that low financial literacy is related to the inability to adjust the level of current savings in response to changes in the expected future income, making it difficult for actual implementation of economic decisions that were made.


Research Synopsis, Insurance and Financial Literacy Research Center


The Pension System in Israel with its Two Levels: An Overview of the Accepted Reforms, both its Institutional and its Quantitative Sides (Hebrew)

Avia Spivak, 2012

This study examines the Israeli pension system with its two levels – National Insurance and Pensionary Saving – and produced profiles of employees by population groups using income surveys and a unique simulator that allows cutting the revenue available upon retirement. This report describes the foundation work and findings from the work. The study binds together many issues: economic, empirical general knowledge regarding pensions, and National Insurance; institutional, legal knowledge about pension activity in Israel; statistical knowledge of Israeli data bases; actuarial data on life expectancy and disability and mortality risks, which are essential to understanding comprehensive pension plan pricing; and pension taxation knowledge, which enables analyzing the impact of the tax system on the pension system results.


A report for the National Insurance Institute, the Economics and Society Program at the Van Leer Jerusalem Institute


The Pension System in Israel after Fifteen Years of Reform (Hebrew)

Leah Achdut, Avia Spivak, 2010

This study is part of a comprehensive study designed to examine the development of the pension system in Israel, and the current image in its achievements and weaknesses. A comprehensive review of the reforms carried out in the pension system in Israel over the last two decades is presented here in two levels – national insurance and the occupational pension – based on analysis of key characteristics and concepts that guided them. The review follows a description of some reform models carried out in the OECD countries.


Published as part of a series of policy studies. The Economics and Society Program at the Van Leer Jerusalem Institute


The New World of Pensions – After the 2003 Explosion (Hebrew)

Rami Yosef, Avia Spivak, 2008

This booklet reviews the implications of the 2003 reform on the rights of the insured in pension funds and explores the consequences of selling the new pension funds to insurance companies. The authors also examine the nature of the collective agreement that provides pensions for all employees. Finally, the writers try looking towards the future to see how to prepare for the next reform of the pension industry, as past experience shows that once every 10–15 years a significant reform occurs in this industry.


Published as part of a collection of essays. The Economics and Society Program at the Van Leer Jerusalem Institute


Mendatory Retirement Law in Israel (Hebrew)

Rami Yosef, Avia Spivak2005

Until 2008 the pension provision in Israel was not anchored in law but was dependent on collective agreements and bargaining with the employer. This article, which was published in 2005, provided the basis for mandatory pension law legislation in Israel, establishing the claim with the help of actuarial calculations and findings from previous works. The article proposed a new computational framework for the pension plan, including the required actuarial work and an estimation for calculating the cost of mandatory pension as part of the country’s budget.


Published as part of a collection of essays. Economics and Society Program at the Van Leer Jerusalem Institute