Israel Should Rethink Golden Parachutes for Career Soldiers

Kahlon should not rush into deal for the defense budget before making substantial reforms in the IDF's pension scheme.

Finance Minister Moshe Kahlon, left, with Defense Minister Moshe Ya'alon.
Marc Israel Sellem

It’s not clear why Finance Minister Moshe Kahlon raced to sign an agreement on the defense budget with Defense Minister Moshe Ya’alon. After all, the state budget has already been approved, and only this week did Finance Ministry staffers, along with staffers from the Prime Minister’s Office, begin a thorough study of the agreement’s details and ramifications. These ramifications relate not only to the defense budget for the next five years, but also to the pensions career soldiers will receive over the coming decades – and therefore, also to the pension benefits other powerful groups of workers might demand.

It’s hard to understand why Kahlon considered it so burning to approve a pension arrangement that promises every career soldier who retires at age 43 a pension of up to 12,000 shekels a month ($3,100), for a cumulative cost of 2.5 million shekels (if it were cashed out today) by the time he reaches the standard retirement age of 67. Moreover, the entire package, whose actuarial cost is estimated at 2.5 billion shekels a year, will be paid by the state – or in other words, by the Israeli taxpayer.

The new pension deal constitutes only a slight improvement over the package career soldiers currently receive through their state-funded pensions – a package worth between 3 million shekels and 3.5 million shekels per retiree. So what was the purpose of the historic shift from state-funded pensions to contributory pensions in 2004, if in the end, the monstrous costs will be reduced only slightly?

The Finance Ministry has defended itself by claiming that this was the most that could be obtained through an agreement with the defense establishment, and that critics should focus on the half-full part of the cup, which includes new rules of transparency and a commitment by the army to reduce the number of career soldiers who stay on until retirement age.

But it’s hard to accept this appeasing approach, especially when it justifies the most outrageous provision of the agreement. Alongside the generous pensions all career soldiers will receive from the state from age 43 to 67 (the so-called bridge pension), the pensions they receive after age 67 will also be much higher, because the state will give them a retirement grant totaling some 300,000 shekels, to be deposited in their pension savings account.

In other words, they’ll get a state-funded pension for 24 years, a huge retirement grant, and also a regular pension from age 67, calculated on an inflated basis. It’s expensive, it’s outrageous and it’s also immoral. Moreover, the agreement fails to make the requisite distinction between the pension terms of combatants and noncombatants, one that would enable a fair allocation of resources in a manner that genuinely serves national security.

Approval of this agreement must therefore be postponed. The 300,000 shekel retirement grant, which has no rationale whatsoever, must be canceled, and a new discussion should be held on the need to distinguish between combat service and other types of service.