Pensions at Risk

One day - and that day is not too far away (only 15 or 20 years from now) - it will be discovered that the state cannot meet pension payments to its own citizens.

The officials in the office of the Finance Ministry's accountant-general simply could not believe their eyes. An annual increase of 25 percent - they had never seen such a thing. What had happened? Would pensioners receive gargantuan payment increases? Had the number of pensioners suddenly skyrocketed? The figures appeared so suspicious that Accountant-General Nir Gilad decided he would not sign the actuarial report, which appears for the first time here - unsigned and unapproved.

The subject is the defense establishment's pension figure: career officers in the Israel Defense Forces, Defense Ministry employees, Shin Bet security service and Mossad personnel. According to the defense establishment's declaration, financial commitments for pension payments in 2000 made a quantum leap to a total of approximately NIS 56 billion (see table) - an astronomical 25-percent increase in a single year!

The accountant-general has full access to the figures on the pensions issued by "normal" government ministries but is forbidden from seeing the defense establishment's figures. The Defense Ministry's chief accountant is the only chief accountant in all government ministries who is not directly accountable to the accountant-general; thus, the Defense Ministry transfers to the Finance Ministry only the final figures, without any explanations or details. The moment Gilad realized he would be unable to verify whether the salary and pension increments had been received and calculated properly, he decided to change the rules of the game: He refused to sign the report. And that is the way matters still stand between Gilad and Defense Ministry Director-General Major General (res.) Amos Yaron.

Another alarming figure in the report is the state's total financial liabilities for future pensions payments. It mentions a fantastical amount of some NIS 220 billion (see table). Where will such a sum be found? The people involved are a large group of civil servants who believe that, one day, when they retire, there will be sufficient money in the state's coffers to pay them a pension.

Those pensions are not the only debts the state owes its citizens. Israel's national debt today stands at NIS 460 billion. To this sum, one must add commitments to the pensions of municipal employees, because the municipalities will never be able to shoulder the burden alone. That commitment totals some NIS 120 billion. To that sum, one must add the actuarial deficit of the old pension funds for which the state has put up guarantees - to the tune of about another NIS 100 billion. Thus, all in all, the pension commitment is immense - NIS 900 billion - almost twice Israel's annual gross national product.

One day - and that day is not too far away (only 15 or 20 years from now) - it will be discovered that the state cannot meet pension payments to its own citizens. What will happen then? The politicians are not too perturbed about this problem, because they can never think further into the future than the primaries for the next elections.