Keren Hishtalmut: the “cherry on top”
Keren Hishtalmut (קרן השתלמות) is a medium- to long-term savings product that combines flexibility, the option to withdraw the money after six years and significant tax benefits. This page explains how the fund works for employees and self-employed people, which ceilings and tax benefits apply, and how the choice of management company and investment track can affect the amount accumulated over the years.
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Keren Hishtalmut (קרן השתלמות)A medium-term savings product (six years) that benefits from a tax exemption on investment gains up to the applicable contribution limit. is one of the most popular and worthwhile savings channels in Israel. Although many people tend to confuse it with a pensionA monthly payment made to a person after retirement from work in order to help maintain their standard of living., it is a fundamentally different product: medium- to long-term savings that are not necessarily intended for retirement and that enjoy exceptional tax benefits.
What is the difference between Keren Hishtalmut and a pension?
- Flexibility and liquidity
- Unlike a pension, the money in a Keren Hishtalmut can be withdrawn as a lump sum, rather than as a monthly pensionThe monthly amount paid to the saver in retirement, calculated by dividing the amount accumulated by a "conversion factor.", just six years after the first deposit.
- Purpose of the money
- Historically, the fund was intended to finance professional training, but today it serves as savings for any purpose—from a family vacation to a long-term investment.
- Mandatory deposits
- Unlike a pension, there is no legal obligation to contribute to a Keren Hishtalmut, and it is considered a voluntary benefit.
Keren Hishtalmut for employees
For employees, this is one of the most significant benefits available. Deposits are usually split between the employee and the employer, so most of the savings come from the employer.
- Employer contribution
- About 7.5% of salary.
- Employee contribution
- About 2.5% of salary, deducted from net pay.
- Eligible salary ceiling (2026)
- The tax benefits apply up to a salary ceiling of 15,712 NIS per month. Deposits can also be made above this amount, but the excessThe initial amount the insured pays out of pocket when making a claim. portion will not receive the tax benefits.
Why is it so worthwhile? The tax benefits
The tax benefit applies twice and increases the power of your money:
Keren Hishtalmut for self-employed people: smart saving and a tax shelter
For self-employed people, Keren Hishtalmut is often the first product worth considering because it combines an income-tax benefit with an exemption from tax on investment profits.
As of 2026, there are two important ceilings:
Two tax benefits for self-employed people
| Feature | Income-tax benefit (deduction) | Capital-gains-tax exemption |
|---|---|---|
| Contribution rate | You can contribute up to 4.5 % of taxable income | You can receive an exemption from tax on the profits |
| Ceiling | Up to an income ceiling of 293,397 NIS per year | On deposits of up to 20,566 NIS per year |
| What it means | A deposit of up to 13,203 NIS per year can produce a tax benefit worth up to about 4,621 NIS per year | Profits on deposits up to the ceiling are exempt from capital gains tax |
A deposit into the fund may also reduce taxable income for the purpose of calculating Bituach Leumi (ביטוח לאומי) contributions.
You can also switch between investment tracks or management companies without creating a tax eventAn action in an investment portfolio (such as selling at a profit) that triggers an immediate tax payment to the state.. Tax applies only when the money is withdrawn and in accordance with the exemption rules.
Liquidity: when does the money become available to you?
In most cases, the fund becomes liquid after six years. At that point, you have two options:
- Withdrawal
- Receive the money as a tax-free lump sum.
- Continue investing
- Leave the money in the fund. Many people choose this option so they can continue enjoying the capital-gains-tax exemption on the amount already accumulated, making the fund an excellent long-term investment channel.
Investment tracks: how does your money work for you?
The fund is invested in the capital market, and you can choose the level of risk:
Main investment tracks
Each track offers a different combination of risk, volatility and returnThe profit (or loss) from an investment over a certain period, usually expressed as a percentage of the original amount invested. potential.
Options worth knowing:
- General track: A balanced combination of shares, bondsA type of "loan" that an investor provides to a government or company in exchange for repayment of the principal plus interest. and other assets.
- Equity track: High exposure to shares. Suitable for people who plan to leave the money invested for many years and are prepared to absorb volatility.
- Bond or conservative track: A lower level of risk, suitable for people approaching their planned withdrawal date.
- Index-tracking tracks, such as the S&P 500An index composed of 500 of the largest and leading companies traded on U.S. stock exchanges.: These have become very popular among savers who want exposure to leading indexes.
Your choice of track will determine the return, meaning the profit, and the volatility, meaning the risk, of your money over the years.
How should you choose an investment track?
Considerations worth examining
- Rule of thumb: The longer the investment horizon, the more reasonable it may be to consider a track with greater exposure to shares.
- Personal consideration: The choice depends on your personality and your ability to cope with market fluctuations. Would temporary declines make you panic?
- The power of the exemption: For many people, Keren Hishtalmut is a long-term investment channel. In such cases, some choose an equity track to maximize the fund's major advantage: a full capital-gains-tax exemption on significant profits.
- Index-tracking tracks: Tracks such as the S&P 500 suit people who want exposure to leading indexes and place less faith in active managementAn investment approach in which the fund manager attempts to select specific shares or time the market in order to achieve a higher return than the index. by the fund manager.
Compare and choose carefully
Before choosing a Keren Hishtalmut, it is worth comparing the available funds, their performance, costs and investment tracks.
Summary
Many people view Keren Hishtalmut as the most worthwhile savings product currently available. It combines flexibility, liquidityThe speed and ease with which money can be withdrawn from an investment and converted into cash in a bank account without significant penalties. and tax benefits that are difficult to find elsewhere. It is a benefit worth understanding, monitoring and managing properly in order to grow your personal wealth over time.