Israel's pension funds are collecting payments from young employees with the clear understanding that by the time they reach retirement age, there will be no money to pay their pensions, Deputy Finance Minister Yitzhak Cohen told the Knesset Finance Committee yesterday.

MK Joseph Paritzky (Shinui), who convened the meeting, called the situation a "ticking bomb."

He proposed raising the retirement age to 70 in order to decrease the funds' actuarial deficit.

Cohen scorned his suggestion, calling it equivalent to "giving aspirin to the mortally injured".

Cohen said a Finance Ministry calculation indicates the pension funds' actuarial deficit totals NIS 136 billion.

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This deficit, he said, stems from preferential terms for powerful lobbies, irresponsible management of members' rights and money, and the financing of early retirement plans. The average salary of the funds' senior managers is NIS 70,000 a month, he added.

He also said the funds were damaged by the Histadrut Labor Federation's control, including the appointment of cronies to management positions.

"The only solution to the deficit problem is the appointment of administrators," Cohen said. "There is an immediate need to appoint administrators to prevent an annual increase of billions of shekels in the actuarial deficit."

Cohen noted that the treasury had had a positive experience with the appointment of an administrator to the construction workers pension fund. That fund now plans to file a lawsuit seeking to reclaim NIS 630 million transferred from it to the Histadrut.

Cohen's comments led to a sharp exchange with Histadrut Chair MK Amir Peretz, who asked rhetorically whether the administrator had managed to eliminate the fund's deficit, and if not - why.

Shmuel Avital, chairman of the Mivtachim pension fund, said it is possible that salaries at Mivtachim were high in the past, but today no one earns more than NIS 30,000 per month.