Pension in Israel in 2026: mandatory pensia, keren hishtalmut and management fees, what to check and negotiate
Israel's pension system is mandatory, private and run by insurance companies. Set up well, it costs almost nothing; set up badly, fees at the legal cap eat a quarter of your savings. What to know and check.
The essentials in 40 seconds
Israeli retirement rests on a mandatory pension (pensia): 18.5% of salary, of which 6% is deducted from your payslip, 6.5% comes from the employer and 6% is severance deposited into the same fund. The self-employed contribute too (4.45% then 12.55% up to the average wage). On top, the keren hishtalmut (up to 7.5% employer + 2.5% employee) is tax-free after six years: the most valuable salary benefit in the country. The real issue is management fees: the law allows up to 6% of deposits and 0.5% of savings, while the state's default funds charge at most 1% and 0.22%. Check your statement, find old accounts on Har HaKesef, and negotiate.
Key figures for 2026
- Employee pension (total)
- 18.5%
- Max fees, default funds
- 1% + 0.22%
- Legal fee cap
- 6% + 0.5%
- Tax-free keren hishtalmut
- ₪15,712 / month
- Keren hishtalmut lock-in
- 6 years
- Exempt annuity share
- 57.5%
The mandatory employee pension
Since the 2017 extension order, every Israeli employer must contribute to a pension fund for its employees. The total is 18.5% of salary, split as follows:
| Share | Rate | What it is |
|---|---|---|
| Employee | 6% | Deducted from gross pay (tagmulim oved) |
| Employer, pension | 6.5% | Part of it funds the fund's disability and life cover |
| Employer, severance | 6% | Pitzuyim: severance capital deposited monthly into the fund |
| Total | 18.5% |
The obligation starts after six months at the latest for an employee with no active fund; earlier, and retroactively, if you already had a pension open with a previous employer. Many employers contribute 8.33% for severance instead of 6%: that is better for you, and negotiable. Contributions are calculated on base salary; check on your payslip that regular bonuses are not excluded from the calculation, and see the income tax guide for the rest of the payslip.
You are free to choose the fund and the company. If you choose nothing, the employer enrols you in its usual fund or a default fund. The first thing to do when you are hired is to tell the employer which fund you want, rather than accept theirs.
Pensia, bituah menahalim, kupat gemel: three products, one job
| Product | What it is | Who it suits |
|---|---|---|
| Keren pensia makifa | Comprehensive pension fund: savings plus built-in disability and life cover, lowest fees | The default choice for the vast majority of employees |
| Bituah menahalim | Individual retirement insurance policy, tailored cover, often higher fees | High earners, specific needs, old policies with a guaranteed annuity factor |
| Kupat gemel | Savings fund without built-in insurance; also as an "investment" version (gemel lehashka'a) | Topping up the pension, flexible long-term savings |
For an employee, the keren pensia makifa is almost always the right answer: it includes disability and life cover at no separate cost and has the lowest fees. An old bituah menahalim opened before 2013 may carry a valuable guaranteed annuity factor: do not close it without having it reviewed.
Management fees: the real cost of your pension
Every fund charges two fees: a percentage of each deposit (dmei nihul mehafkada) and an annual percentage of accumulated savings (dmei nihul mehatzvira). Over thirty years, the second one weighs most.
| Level | On deposits | On savings / year |
|---|---|---|
| Legal cap | 6% | 0.5% |
| State default funds (2024-2028) | ≤ 1% | ≤ 0.22% |
| Alternative mix offered by some default funds | 1.2% | 0.2% |
The four default funds selected in the 2024 tender are Meitav, Altshuler Shaham, Mor and Infinity, for 1 November 2024 to 31 October 2028. Any employee can join them, and their caps are the benchmark to negotiate elsewhere. Three rules:
- Read your annual statement (doh shnati): both fee rates are shown on it.
- Negotiate: an advisor or your employer often gets better than the posted rate, especially for a group of employees.
- Transfer if needed: switching funds is free, and the built-in insurance carries over without a new waiting period if the transfer is continuous.
Keren hishtalmut: the benefit to negotiate
The keren hishtalmut (a "study fund", in practice medium-term savings) is not required by law, but many collective agreements and most tech employers offer it. It is the best deal in the system:
- Deposits: up to 7.5% of salary from the employer and up to 2.5% from the employee (at least a third of the employer's share).
- Exemption: deposits on salary up to ₪15,712 a month (₪188,544 a year in 2026) are not taxed going in, and gains are tax-free on withdrawal.
- Lock-in: the money becomes available tax-free once the fund is six years old. An earlier withdrawal to pay for studies is possible under the fund's conditions.
- Liquidity: after six years you can leave the money invested and withdraw whenever you like, still tax-free on gains.
At hiring, a 7.5% + 2.5% keren hishtalmut is worth roughly a 7.5% net raise, tax-free. If the offer does not include one, ask for it before discussing gross salary.
Self-employed: mandatory pension and keren hishtalmut
Since 2017, a self-employed person aged 21 up to early retirement age, active for at least six months, must deposit into a pension fund:
| Monthly income band | Rate |
|---|---|
| Up to half the average wage (≈ ₪6,885) | 4.45% |
| Half to the full average wage (₪13,769) | 12.55% |
| Above the average wage | No obligation |
These deposits earn a deduction and a tax credit (next section). A self-employed person can also open a keren hishtalmut: they deduct up to 4.5% of income, on income capped at ₪293,397 a year, i.e. ₪13,203 deductible in 2026; deposits up to ₪20,566 a year are exempt from capital gains tax on withdrawal. For status, advances and contributions, see the osek patur and osek murshe guide and the Bituach Leumi guide.
Tax benefits on deposits
| Benefit | Employee | Self-employed |
|---|---|---|
| 35% tax credit (section 45a) | On deposits up to 7% of a ₪9,700 insured salary: up to ₪237.65 less tax a month | On 5.5% of eligible income: credit up to ₪4,481 a year |
| Income deduction (section 47) | Deposits above the insured salary, within a cap | 11% of eligible income, up to ₪25,608 a year |
| Employer contribution not taxed | Up to 7.5% of a ₪34,423 salary | — |
| Tax-free severance | ₪13,750 per year of service | |
The 35% credit is automatic for an employee (it appears on the payslip). A self-employed person must claim it on the annual return with the fund's certificate (ishur shnati). If you missed it, a tax refund claim covering six years can recover it.
Olim: foreign pensions and the Israeli pensia
- Your foreign pension stays where it is: a 401(k), IRA, UK workplace pension or French retraite keeps building for the years you worked there. Moving it into an Israeli fund is usually impossible or costly in tax.
- For ten years, a new immigrant is exempt from Israeli tax on foreign pensions: see oleh tax benefits. Americans should read the US–Israel treaty guide: the IRS keeps taxing US pensions, and Israeli funds raise their own US reporting questions.
- The pensia starts with your first Israeli job: choose the fund on day one, even though contributions only begin in month seven.
- Starting late (aliyah after 40) makes the Israeli pension modest: one more reason to negotiate a keren hishtalmut and open a kupat gemel lehashka'a on the side.
Withdrawal, retirement age and how the annuity is taxed
The legal retirement age is 67 for men and 62 to 65 for women depending on birth year (65 for women born from 1970). Funds allow early retirement under conditions, usually from 60, with a reduced annuity.
- The pension is paid as an annuity (kitzba). A lump sum can be taken from the portion above the required minimum annuity (₪5,306 a month in 2026), if savings allow.
- The annuity is taxed as income, with 57.5% of the eligible annuity exempt in 2026, on an annuity up to ₪9,430 a month (so at most ₪5,422 tax-free).
- Early withdrawal of pension savings outside the permitted cases is heavily taxed: avoid it unless you have discussed a hardship case with an advisor.
- Severance can be left in the fund ("continuity of rights") or withdrawn when you leave a job; the exempt portion is ₪13,750 per year of service.
Finding all your accounts: Har HaKesef and the Mislaka
Every change of employer can leave an account behind. An account nobody contributes to often sees its fees rise to the legal cap. Two tools:
- Har HaKesef, the Capital Market Authority's service (itur.mof.gov.il), searches for free every pension, keren hishtalmut, gemel and life policy in your name, with your teudat zehut.
- The Mislaka (pension clearing house) gives a detailed, consolidated view; a licensed advisor can query it with your written consent to prepare a consolidation.
Merging old pensions into your active fund lowers fees and stops you paying disability cover several times.
What changes in 2027
- Several 2026 ceilings were not indexed (left at 2024 levels despite inflation): a revaluation is possible in January 2027. This page will be updated when it is published.
- The default funds stay those of the 2024 tender until 31 October 2028: their fee caps remain the benchmark in 2027.
- The annuity exemption is scheduled to rise from 57.5% to 67% from 2028: for anyone retiring at the end of 2027, the timing of the first payment may matter.
Frequently asked questions
Is a pension mandatory in Israel?
Yes. Since 2017 every employee must be enrolled in a pension fund: 18.5% of salary in total, made up of 6% deducted from pay, 6.5% from the employer and 6% severance (pitzuyim) deposited into the same fund. The self-employed must contribute too: 4.45% of income up to half the average wage, then 12.55% up to the average wage.
What management fees are normal on an Israeli pension?
The law caps fees at 6% of deposits and 0.5% of accumulated savings a year, but nobody should pay that. The state-selected default funds (Meitav, Altshuler Shaham, Mor, Infinity, until 31 October 2028) charge at most 1% of deposits and 0.22% of savings. If your statement shows more, negotiate or switch: transfers are free.
What is a keren hishtalmut?
A medium-term savings fund (literally a "study fund"), funded by the employer up to 7.5% of salary and by the employee up to 2.5%. Gains are tax-free if the money stays six years, on salary up to ₪15,712 a month in 2026. It is the most valuable benefit in the Israeli system: negotiate it when you are hired.
Can a self-employed person open a keren hishtalmut?
Yes. They can deduct up to 4.5% of income, on income capped at ₪293,397 a year, which is ₪13,203 of deductible deposit in 2026. Deposits up to ₪20,566 a year are exempt from capital gains tax on withdrawal.
How do I find old pension and keren hishtalmut accounts?
With the official Har HaKesef ("money mountain") tool run by the Capital Market Authority at itur.mof.gov.il: it searches every retirement savings account in your name using your teudat zehut. Forgotten accounts from past employers are common, and their fees often creep up to the legal maximum.
At what age can I draw my Israeli pension?
The legal retirement age is 67 for men and 62 to 65 for women depending on birth year (65 for women born from 1970). Funds allow early retirement under conditions, usually from 60, with a smaller annuity.
Is an Israeli pension taxed?
Yes, as income, but part of it is exempt: in 2026, 57.5% of the "eligible" annuity, on an annuity up to ₪9,430 a month, so at most ₪5,422 a month tax-free. The statutory schedule raises the exempt share to 67% from 2028.
Should olim move their US 401(k) or UK pension to Israel?
Usually not, and often it is not possible without tax consequences. Foreign pensions stay where they are; for ten years a new immigrant is exempt from Israeli tax on foreign pensions, and the US-Israel or UK-Israel treaty decides who taxes what afterwards. Your Israeli pension starts with your first Israeli job, and the two add up.
How we work
Every figure on this page is checked against the official source listed at the bottom and dated. When a schedule changes, the page is updated within days of the official publication. Our methodology.
Sources
- TheMarker Super Marker — 2026 deposit ceilings and amounts (pension, keren hishtalmut, self-employed, annuity exemption)
- TheMarker Super Marker — default pension funds: fees, selected managers (1 Nov 2024 – 31 Oct 2028), legal caps
- Capital Market, Insurance and Savings Authority — Har HaKesef account search
- Protocol — guide to Har HaKesef (operator, how it works)
- CWS Israel — pension rights of the self-employed in 2026 (4.45% / 12.55% mandatory rates)
- Mondaq — extension order on mandatory pension (18.5%)
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