It sounds like a brilliant idea of a politician in an election period: sell young people a campaign that promises them another NIS 500 on average in their monthly net pay without them having to do a thing. Just let them not pay a shekel in compulsory pension contributions until they reach 40.
The argument is that people need the extra cash during the years that they are bringing up a family, while pensions in Israel are high.
When the idea comes from someone like Prof. Avi Simhon, the head of the National Economic Council, who has already tried to promote controversial ideas such as mortgage subsidies, one really does tend to think that it’s a political initiative, except that senior Ministry of Finance officials are also in favor of this kind of policy.
In July, "Globes" reported that, in advance of the next Economic Arrangements Bill accompanying the state budget, the Ministry of Finance was working on a plan for reducing pension contributions. The rationale is that Israelis have high levels of savings, but consumption is depressed and therefore economic growth is sluggish, resulting in lower tax revenues. If Israelis had more disposable income, they could consume more and get the economy moving faster, and perhaps even overcome the cost of living.
The criticisms of Simhon’s proposal could be cited at great length, but here are a few points. The average reduction in monthly pension payments for those who might choose to take advantage of it will be NIS 2,000, because of the compound interest effect, but people tend to prefer the present, even if that will cost us dearly when we are old and need the money for health and nursing services, to help our children, or simply to grow old gracefully. Israelis’ savings are growing rapidly because the stock market is on a rally, but what if the markets fall? And where is the logic in promoting a proposal like this when the labor market is in a spin because of the AI revolution?
Israel’s pension system is considered to be one of the most successful in the world, because since 2008, after determined work against political pressures, compulsory pension contributions have become established here. To make life easier for Israelis, there is no need to raise net pay, but rather to raise purchasing power. That is to be accomplished by reducing the cost of living, but confronting monopolies and getting into a fight with the strongest players in the economy is a much bigger headache than selling young people an illusion that will ultimately be at their expense.
Published by Globes, Israel business news - en.globes.co.il - on September 17, 2026.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.