Maximizing Your Pension and Disability Rights in Israel: A Comprehensive Guide

Almost every employee and self-employed person in Israel has a pension fund, but few know that it hides an insurance coverage that can guarantee three-quarters of their salary in the event of illness or injury. Attorney Sharona Bar-Nboim, who accompanies policyholders against pension funds and medical committees, breaks down the mechanism and explains how not to lose rights that are worth a lot of money.

The Mandatory Contribution Starting at Age Twenty

According to Attorney Bar-Nboim, since the Pension Law enacted on January 1, 2008, anyone working legally for an employer is required to make contributions to a pension fund, from the most junior employee to the senior executive, and the self-employed are also required to contribute for themselves. The age at which the obligation to contribute begins is twenty for women and twenty-one for men.

At the basic level, Bar-Nboim explains, the employer and the employee each contribute about six percent, and an additional six percent is allocated to the severance pay component. In certain sectors of the economy, expansion orders apply that increase contributions, reaching even eighteen and twenty-two percent. Even an employee at the simplest level, a waiter or a shop worker, is bound by this basic contribution.

Upon entering the fund, Bar-Nboim says, a health declaration is often required. The fund wants to ensure that the newcomer is healthy, and if they have existing impairments or diseases, it may qualify or exclude certain clauses. With small private employers, this requirement is common, whereas upon entering a collective in a large company, this requirement is sometimes eased or becomes unnecessary.

The Disability Component You May Not Know

Inside the pension fund, there is an insurance component for disability situations. A person who falls ill mid-life or is injured, and meets the criteria with a significant impairment that causes a loss of working capacity, is entitled to payment from the fund. The recognized disability rate ranges between twenty-five and one hundred percent, depending on the impairment and condition.

According to Bar-Nboim, this is often a graded process: a person experiences a shocking event and initially receives one hundred percent for a long period, and later, as they recover and return to the labor market to a partial extent, the entitlement is updated accordingly. Once a person enters an eligible state, they receive seventy-five percent of their insured salary. While this is not the full salary, it is significant coverage designed to ensure basic livelihood during the illness.

Here, Bar-Nboim emphasizes, lies a point that many miss: the height of the insured amount. The higher the premium paid, the higher the salary that can be insured for disability. Seventy-five percent can be from a salary of 5,000 NIS, but also from a salary of 10,000, 12,000, or 17,000 NIS. It is always possible to contact the fund and arrange another plan, as well as agree with the employer on higher contributions and anchor this in the employment agreement, an option that many young people are unaware of.

Maintaining Continuous Deposits

One of the most important points, according to Bar-Nboim, is maintaining continuous deposits. After five and a half months during which a person does not make contributions and is not in the labor market, the sequence is broken, and the fund becomes inactive. If it remains inactive for over a year, the consequence is heavy: when a person starts a new job, the employer sees them as someone without an active fund, and by law will be required to contribute for them only starting from the sixth month of work.

That is, a person might lose five and a half months of employer contributions in the new place, including the severance pay component. This is a real loss, as the severance pay component within the fund can be redeemed at the end of employment, often even tax-free. It is an excellent savings fund, especially given the high yields recorded by pension funds in recent years, and any break in continuity directly harms it.

The solution, according to Bar-Nboim, is to always keep an active sequence, even during periods when there is no work, for example during a prolonged stay abroad. This can be done by maintaining risk insurance or independent deposits, even in small amounts. The main thing is that the fund remains active.

Disability Pension and National Insurance Simultaneously

A point that many do not know: when it comes to an illness unrelated to work, it is possible to receive disability from the pension fund simultaneously with general disability allowance from the National Insurance Institute, without any offset. A person with a significant impairment who is unable to work can receive seventy-five percent of the insured salary from the pension, and simultaneously a full disability allowance from National Insurance, which currently stands at about 4,550 NIS.

In a work accident, the picture is different. A person injured at the workplace, on the way there, or back from it, exercises their rights in National Insurance and simultaneously in the pension fund, but offsets may apply here depending on the policy. There are policies with full offset and some with partial offset, and this is where the lawyer's work comes in: to understand the policy, understand the severity of the impairment and the length of the period the person did not work, and act so they receive as much as possible.

The Difference Between Disability Pension and Work Incapacity

Those large pension companies, such as Menora Mivtachim, Migdal, More, Harel, and Meitav Dash, are also insurance companies. Alongside the pension fund, they offer work incapacity policies. This is a policy that the insurance company tailors to a person according to their age, health declaration, and personal mix, and it always requires a health declaration.

The advantage is that in work incapacity, you can insure yourself for very high amounts, 20,000, 30,000, and even more. Everything depends on the health condition upon entering the policy and the height of the premium the person is willing to pay. Premiums for high amounts are expensive, and therefore she recommends entering such policies at a young age and in a proportionate and reasonable scope, neither bloated nor too minimal.

The Warning: The Policy That Might Be Emptied of Content

Here Bar-Nboim warns of a common trap. At the moment of truth, when a person claims a work incapacity policy, insurance companies pull out the full medical file and look for a causal link that will allow them to reject the claim. An example she gives: a person who reported attention deficit disorders in high school and took Ritalin, and now suffers from anxiety and depression, may find that the insurance company links the two to reject a claim for full work incapacity.

Therefore, she emphasizes, it is important to consult with a lawyer in the field and check the medical file even before purchasing a policy. There are people whose medical history is so heavy that at the hour of truth the company will exclude everything and not pay. In such cases, Bar-Nboim says, it is sometimes better to direct that money to a monetary fund or another savings track. The yields in work incapacity can be excellent, but the coverage is only worth something if it is actually paid when needed, and therefore this must be done wisely and with professional guidance.

The Golden Recommendation

Attorney Bar-Nboim's golden recommendation is simple yet critical. The moment a person enters an eligible state, even before taking any step, they must contact the pension fund and request two things: their policy, including clarification of whether it is active or inactive, and the full deposit breakdown. This is a report detailing all employer deposits over the years.

The emphasis, she explains, should be placed on what happened in the fund in the last five years, meaning the sixty months preceding the event. With these documents in hand, one can proceed and examine the rights. Bar-Nboim accompanies her clients up to the fund's committees, and in cases where the fund refuses, she sues, with full success in her words.