Want to Be a Millionaire? Retire From the Israeli Army

Pensions of ex-defense workers are three, five and even 10 times higher than those of the average Israeli, with many ex-soldiers and defense workers raking in millions a year after retiring.

As hundreds of thousands of Israelis are bracing for the impending cuts in the 2013-2014 budget, and watching with horror as tycoons perform their haircuts in the capital markets, some market sectors are not that troubled. Their salaries and pensions are disconnected from millions of other employees in the workforce. One of the largest of these groups is retirees from the defense establishment, and from the army in particular.

Numbers obtained by TheMarker and calculations by government economists reveal that the pensions enjoyed by IDF retirees are three, five and even 10 times larger than most Israelis'. About one-third of IDF retirees enjoy pensions of NIS 3 million to 4 million. Twenty-nine percent of them take in pensions of NIS 4 million to 5 million, while 12 percent of them will receive NIS 5 million to NIS 6 million. Eight percent of them will get NIS 8 million to 10 million over their lifetime.

These calculations were based on the relevant determinant salaries and on years of service of people retiring between 2009 and 2011. The numbers took into account the age of the retirees, assuming a life expectancy of 79 (which is the current average for males, who make up the majority of retirees). The calculations did not include potential changes in currency values, salaries or life expectancy.

A senior economist with expertise in these calculations said that a more comprehensive actuarial assessment, looking at wider parameters, would result in even higher figures. Pensions of NIS 4 million to 7 million are exceptionally high, and the result of both high salaries and the low age of army retirement, which ranges from age 42 to 50.

In comparison, pensions for workers in other public sectors who retire between age 40 and 50 amount to hundreds of thousands of shekels for most, with NIS 1 million for mid-level managers.

Army pensions have risen dramatically – by a factor of 10 – over the last two decades. The combined actuarial commitment of the state to all defense establishment pensioners has been assessed by the Accountant General at the treasury as totalling NIS 257 billion. In 2008, it stood at NIS 175 billion.

And it's not just senior officers or people in combat roles who are getting the windfall. Most of the retirees with pensions in the millions have mid-level rankings, such as NCOs and staff sergeants. Most held office jobs or worked in professions that are identical to civilian ones. Furthermore, many of the retirees continue working in the public sector, whether in the government or in local authorities, in defense industries, or in the Defense Ministry or army-related projects. These retirees are viewed by financiers and real estate agents as very powerful clients with abundant means.

Cash payments to all these retirees are expected to dramatically increase over the coming years, consuming ever bigger portions of the defense budget pie, which has itself grown substantially in recent years. A senior official who is familiar with salaries in the defense establishment says that pensions in the NIS 8 million-10 million range are given not only to generals and brigadiers, who often retire later age, but also to employees with specialized skills, who have accrued additional perks such as recognition of their academic degrees. At the top of this pyramid, apparently, sit the pilots, some of whom enjoy pensions amounting to NIS 8 million or more.

Darren Whiteside, Reuters