Savings and investments in Israel: where to start

Savings books, the PEL, the Livret A: if you grew up in France, these are your savings reflexes. In Israel, they do not exist. To save and invest money in Israel, whether you are an oleh or a long-standing Israeli, employee savings go first through two tools that appear on your payslip: the Keren Pensia (pension fund) for retirement, and the Keren Hishtalmut (study fund) for medium-term savings. Before talking about investments, you need to check that these two are in place and well managed.

Retirement in Israel first: Keren Pensia or Bitoua'h Menahalim

The law requires pension contributions of at least 18.5% of gross salary in total: 6% paid by you, deducted from your salary, and the rest paid by the employer (pension and severance pay). Many employers contribute more, depending on the contract. You can choose between a Keren Pensia (pension fund) and a Bitoua'h Menahalim (managers' insurance policy). The old-age allowance paid by Bitoua'h Leoumi (National Insurance) remains modest, and it depends on how long you have lived in Israel: this is why so many people keep working after retirement age.

The system is different from the French one. Here, retirement works by individual capitalisation: every sum paid into your account belongs to you and grows until you retire. The final capital therefore depends directly on the number of years during which your money was invested.

Arriving at 40 or 50: how to make up for lost time

The shorter the horizon, the more every choice counts, from the first months here:

The Keren Hishtalmut: the tax advantage not to leave idle

This is a medium-term savings fund, often offered by the employer and funded by both of you. Its strength is a double tax advantage: on the way in, sums paid in up to the ceiling are not treated as taxable income; on the way out, after a period generally set at six years (special cases allow an earlier withdrawal), the capital and the gains can be withdrawn tax-free.

Withdrawing before the end of the period is possible, but it generally means losing the exemption. Contribution rates and ceilings change regularly: check them with your employer, your accountant or your broker rather than relying on a figure read somewhere. Self-employed people can also open a Keren Hishtalmut, with rules and ceilings of their own.

Leaving Israel: what happens to your Keren Pensia?

Before withdrawing your capital when you leave, weigh the cost. An early withdrawal from the Keren Pensia is generally taxed, with a reference rate of 35%, although there are exceptions depending on the situation. The first two years after departure are a turning point: it is better to keep the cover active than to cash everything in a rush, especially if a return is possible. And if you become a tax resident of another country, the same withdrawal may be taxed differently there: have it checked before any decision.

Life insurance in Israel: protecting the family and passing on wealth

Israel abolished inheritance tax in 1981, whereas France applies its own as soon as there is a sufficient link. Be careful: the absence of tax in Israel does not automatically cancel a French obligation, if the deceased or the heir keeps a tax residence link with France. In both countries, a life or death insurance policy with a clearly named beneficiary pays the capital directly to the person chosen, outside the standard inheritance procedure. So name your beneficiaries with care, and distinguish the need for protection (death) from the need for savings.

Financial investments in Israel, next

No investment guarantees a return. Stock market, bonds, property: each depends on your situation, your time horizon and your tolerance for risk. The essential thing is that your foundations are solid before going further: pension being funded, Keren Hishtalmut optimised, suitable life insurance. Financial investments come on top of these foundations, not in their place.

As a francophone insurance broker in Israel, I can go through this with you, in French. Call me on 054 307 0916 or fill in the form below.