In contrast, in the investment portfolios of the plans in which new members are saving (new pension funds, and profit-sharing funds), there is a much higher weight given to investments abroad, stocks, and corporate bonds, which leads to higher exposure to developments in the financial markets. These investments finance economic activity and development, but are also exposed to higher volatility.
The impact of the trends on the replacement ratio In view of the trends I have presented to this point, the interesting question is what will happen to the level of the pension payout at retirement age. The commonly accepted variable to look at in this context is the replacement rate – what will the retiree’s income be compared to his pre-retirement salary.