Israel's State Pension Liabilities Soar to $200 Billion

Israel's Ministry of Finance reported this week that the state's budget pension obligations are projected to reach 723 billion shekels in 2025, an increase from 716 billion in 2024 and 600 billion in 2013. These liabilities primarily cover pensions for the first generations of civil servants, many of whom are now retired.

Until the late 1990s, Israel operated under a "semi-socialist" system where state and union-owned enterprises dominated. Civil servants, including those in major sectors like telecommunications, electricity, healthcare, education, and industry, were guaranteed a pension equivalent to 70% of their final salary upon retirement, paid directly from the state budget. Mandatory funded pensions were only introduced for new civil servants in the early 2000s. Existing employees retained their contractual right to budget-funded pensions.

As a result, the number of budget pensioners continues to grow, outpacing mortality rates. Pension indexation, tied to public sector salary increases, further inflates these state obligations. This trend is expected to continue until the mid-2030s, when the generation that entered public service after the introduction of funded pensions begins to retire.

In 2022, the lowest average budget pension was approximately 8,000 shekels per month for education workers, followed by 9,000 shekels for healthcare workers. Pensions for former security personnel are significantly higher, with non-officer retirees receiving an average of 15,200 shekels and former officers receiving 19,400 shekels, often starting in their late 40s or early 50s. Former legal system employees also receive substantial pensions, with prosecutors averaging 16,000 shekels and judges receiving an average of 44,000 shekels.

The core issue is not necessarily the pension amounts themselves, but the fact that they are entirely funded by the state budget, independent of individual savings or financial status. This places a significant burden on current taxpayers, who are unlikely to receive comparable pensions, with even the lowest budget pensions approaching the median salary.