Israel's Legacy Pension System Costs Billions, With Judges Earning Most

Israel's old pension system, known as the "budget pension," continues to impose significant financial burdens on the state budget, with obligations projected to reach 723 billion shekels in 2025. This represents an increase of approximately 7 billion shekels from the previous year and 123 billion shekels compared to 2013. This system, distinct from the modern savings-based pensions, guarantees payments directly from the state budget to former public sector employees who entered service before the early 2000s pension reform.

Under the old system, many civil servants were entitled to pensions up to 70% of their final salary. This applied to a broad range of public sector workers, including those in education, healthcare, security forces, and major state-owned enterprises. While new public sector employees now operate under a savings-based system, existing employees retained their prior terms as part of their employment contracts, creating long-term state liabilities.

As employees who began their careers before the reform continue to retire and receive indexed payments, the overall cost remains high, despite some recipients passing away. Significant disparities exist in pension amounts based on profession. Data from 2022 indicates that former education sector employees received an average of 8,000 shekels monthly, healthcare workers around 9,000 shekels, and non-commissioned security personnel approximately 15,200 shekels. Commissioned officers in security roles averaged about 19,400 shekels, with the possibility of early retirement.

The highest pensions are received by former high-ranking officials. Prosecutors averaged around 16,000 shekels monthly, while former judges received an average of approximately 44,000 shekels per month, equating to over half a million shekels annually per recipient. These payments are not tied to individual savings but are state obligations funded by general state revenues.

The total accumulated liabilities have grown substantially, from 600 billion shekels in 2013 to an estimated 723 billion shekels for 2025, reflecting a 20.5% increase. This 723 billion shekel figure represents the state's long-term commitments, not a single year's payout. The financial strain is expected to gradually decrease as public sector employees hired under the newer savings system begin to reach retirement age, likely starting in the mid-2030s. The current situation is largely a legacy of past labor agreements whose financial consequences will persist for many years.