Text size

The next stage of pension reforms will be to tackle the humongous debt of the public sector's non-contributory pensions, said the Supervisor of Pensions, Insurance and the Capital Market, Eyal Ben-Chelouche yesterday.

Speaking at a Tel Aviv conference organized by the Israel Management Center, Ben-Chelouche stressed that the problem should not be deferred any further, no matter how great the shock waves it will cause to industrial relations.

"There is no reason why the government should be both employer and owner of pension plans," he said. "Just as the government budgets NIS 80 billion to ensure the financial stability of the [private] contributory pension plans in the framework of the reforms carried out, so it will have to tackle the problem of the non-contributory pensions and contribute some NIS 24 billion."

At present, veteran workers in the public sector - those that started their jobs in local authorities before 1999 or in the civil service before 2001 - do not contribute to their pensions, except for a recently imposed 1-percent of their wages. (This latest contribution will increase gradually until it reaches parity with private-sector pension contributions).

As a result, the government was carrying the entire pension burden for all public sector workers, explained Ben-Chelouche, namely an actuarial deficit of some NIS 300 billion.

In 2003, the government introduced a far-reaching reform in the private pension fund sector, which nationalized veteran (pre-1995) pension funds in an effort to save their imminent collapse under tremendous actuarial deficits (estimated by the treasury at NIS 60 billion). The Histadrut labor federation, which had managed most of these funds, objected strongly to their nationalization.

"But now," Ben-Chelouche argued, "we can say that the pension reform was the best thing that happened to the Histadrut, because it turned it into a true trade union that fights for its members' pension conditions. Before the reform, the Histadrut had a conflict of interest, because it owned the pension funds. Many years ago, the Histadrut actuary was dismissed because he dared to point out the dangers that the funds were in."