Jerusalem, 30 June, 2026 (TPS-IL) —
Israel’s wartime fiscal burden is colliding with an aging population and a fast-growing welfare bill, as officials warn that the country’s social security system could exhaust its reserves by 2035 under its current financing model.
The National Insurance Institute, Israel’s main provider of old-age pensions, disability benefits, child allowances, unemployment payments, long-term care support and other social payments, is facing a worsening actuarial crisis that could force the Government to raise contributions, tighten eligibility, cut benefits or cover the shortfall directly from the state budget.
The warning was discussed Monday at a joint Knesset hearing of the State Control Committee, chaired by MK Alon Schuster, and the Labor and Welfare Committee, chaired by MK Michal Waldiger.
Officials from the State Comptroller’s Office told lawmakers that an actuarial assessment published in December 2025 moved the fund’s projected depletion date forward to 2035, earlier than previous forecasts. They also warned that from 2029, the institute’s current revenues and bond redemptions will no longer be sufficient to cover benefit payments required by law.
The crisis comes as Israel is already facing elevated defense spending, reconstruction costs, support for evacuated communities and long-term care for wounded soldiers and civilians following the war. At the same time, demographic aging is increasing pressure on pensions, disability payments and nursing-care benefits.
Dr. Hodiya Lampert, deputy director of the Social and Welfare Audit Division at the State Comptroller’s Office, said the deterioration was driven in part by the 2018 long-term care reform, which sharply expanded spending on nursing-care benefits. According to figures presented at the hearing, annual spending on long-term care benefits has risen to 21 billion shekels, compared with 7 billion shekels before the reform.
“About 30% of elderly Israelis are currently eligible for benefits under the Long-Term Care Insurance Law, and Israel has the second-highest level of spending in this field, after Lithuania,” Lampert said.
She recommended reexamining the assessment method, noting that Israel is the only OECD country that evaluates dependency based on documents alone, without a face-to-face meeting.
Riki Maman, a research fellow at the Kohelet Policy Forum, told TPS-IL that the crisis reflects a basic mismatch between the institute’s legal obligations and its revenue.
“The National Insurance Institute is obligated to pay benefits according to the law — child allowances, old-age pensions, disability benefits and others,” Maman said. “It has the total amount it pays every year, and the total amount it receives every year. In recent years, its expenses have risen significantly.”
Maman said the institute had for years collected more than it paid out, placing the surplus in a reserve fund that generated returns. But that model has now reversed.
“Today, its expenses are greater than its income. It is like going into overdraft,” she said. “If there is no change in income or spending, the savings will eventually run out.”
She said the 2018 long-term care reform was a major driver of the deterioration because it expanded eligibility and made it easier to receive benefits without an in-home functional assessment.
“Eligibility expanded from about 17% to about 30% of elderly Israelis,” Maman said. “That is very high compared with the OECD and other developed countries. It is probably not because there are more functional difficulties in Israel, but because there was a change that made it easier to receive the benefit.”
Maman said benefit expansions often change incentives and bring in far more applicants than policymakers expect.
“They did not correctly estimate the growth in eligibility,” she said.
She added that if the fund is depleted, policymakers will be left with few options.
“When the fund is exhausted, it means there is no way to pay benefits to people,” Maman said. “Either payments are raised through taxes, benefits are cut, or National Insurance contributions are increased. There are not many options here. Either you take more money from citizens, or you give them less.”
Zvika Cohen, acting director-general of the National Insurance Institute, said years of legislation had expanded benefits without identifying funding sources.
“At the end of the day, the National Insurance Institute is the implementing contractor of the legislature,” Cohen said. “There is a lot of populist legislation, and there must be a budgetary numerator. Whoever proposes a legislative amendment must provide a funding source.”
For Israel, the funding crisis is becoming an early test of whether a wartime economy can sustain broad welfare commitments while expanding defense spending and caring for a rapidly aging population. Without a structural fix, the burden will fall either on taxpayers, vulnerable citizens or the state budget itself.