A hishtalmut fund is a tax benefit – a legal way to pay less tax! – that the government provides for medium- to long-term savings (at least six years while the fund is locked, until you can withdraw the money). For self-employed individuals and employees, the benefit is slightly different, and the main point is that the money in the hishtalmut fund is invested (according to a track, like in a pension). When you want to withdraw the money from the hishtalmut fund, you won’t pay capital gains tax – which can be as much as 20% of all the money you’ve accumulated in the fund.
This article is similar to the article on managing your pension, but it’s much simpler. If you’ve already read the article on pensions – the point here is that managing a hishtalmut fund is similar, but you’re only managing two or three parameters: management fees, investment track, and if you’re self-employed, also the deposit amount.
If you’re an education worker, I recommend watching the following video, it can completely change your financial situation! A hishtalmut fund for education workers works differently from a hishtalmut fund in the private sector, so the video will provide you with more relevant information.
What’s the principle here?
A hishtalmut fund is a medium- to long-term savings fund that offers tax benefits. In other words, it’s a savings and investment plan where your profit from it can be very significant, because of the tax benefits the government provides for this type of savings. What parameters can you manage to get the most out of your hishtalmut fund? Keep reading and find out.
Hishtalmut Fund for Employees
To open a hishtalmut fund as an employee, your employer needs to agree to deposit on your behalf into this savings, because deposits to the hishtalmut fund come from two sources: from your net salary, and also from the employer’s pocket. The amount you deposit equals 2.5% of your gross salary. The amount the employer will deposit to the hishtalmut fund equals 7.5% of your gross amount. This amount is not deducted from your gross but comes from the employer’s own account. In other words, for every shekel you send to the fund, the employer will put in 3 shekels. For example: My gross salary is 10,000 NIS. From these 10,000 NIS, taxes will be deducted, pension deposits, and sometimes other things. So my net salary (what actually goes into my bank account), in this case, will be 8,000 NIS. If I contribute to a hishtalmut fund as an employee, then an additional 250 NIS will be deducted from my net salary (the 8,000 NIS) and deposited into the hishtalmut fund (which is 2.5% of the gross salary). In addition, the employer will deposit an additional 750 NIS from their pocket into the hishtalmut fund. In other words, these additional 750 NIS are not deducted from my gross salary, but come from the employer’s account. The government limits tax benefits for employees to deposits of up to 15,712 NIS per year (as of 2025) – an annual “ceiling” of deposits on which you’ll receive a tax benefit. The additional tax benefit of a hishtalmut fund is that on the 7.5% the employer deposits, you don’t pay income tax. There are employers willing to deposit to the hishtalmut fund beyond the annual tax benefit ceiling. In such a case, on what was deposited beyond 15,712 NIS per year, you’ll pay income tax and also capital gains tax at the time of withdrawal. And yes, it’s still very worthwhile.
Hishtalmut Fund for the Self-Employed
Self-employed individuals deposit into their hishtalmut fund from business income. The annual ceiling for deposits that grant tax benefits to the self-employed is up to 20,520 NIS exempt from capital gains tax. A deposit of up to 4.5% of profit is considered a recognized expense and is therefore also exempt from income tax (with an additional limitation of up to 13,203 NIS per year only that will be recognized, even if you deposited more, and even if it’s less than 4.5% of your profit). It’s a bit more complex but focus mainly on this: it’s excellent savings. If you’re an employee and have a patur/licensed business, you can deposit to a hishtalmut fund both as an employee and as self-employed, and the ceiling is cumulative (meaning 15,712 NIS plus 20,520 NIS) and on both deposits you’ll enjoy exemption from capital gains tax.
Hishtalmut Fund Management Fees
Hishtalmut fund management fees are negotiable. Management fees are calculated only according to accumulation, meaning once a year they’ll take a certain percentage from you out of everything you saved that year. There’s no reason to pay more than 0.8% per year. And here too, the quality of service you receive won’t improve if you pay more. Are your management fees high? Negotiate or switch companies, don’t be sentimental.
Where Is the Money in the Hishtalmut Fund Invested?
The hishtalmut fund is invested through different tracks: some with a tendency to increase in value faster (with the risk of sudden value drops) and some more stable (but with less potential to grow). Here too you can compare on sites like My Gemel Net (always compare at least five years back!). I remind you that we compare the performance of tracks over the past five years because that’s the maximum range the site shows, we’d like to see more but that’s what there is. The comparison you’re making is between different tracks, and between different companies. Switching tracks within the managing company you’re already working with can be done easily through the hishtalmut fund’s website or with the help of an insurance agent. Moving money between companies is a bit more complex and I suggest doing it with the help of an agent from the receiving company or an agent who works with several companies and in any case not alone. Managing your hishtalmut fund is easy, requires a status check only once every year or two, and can be worth quite a bit of money without changing a comma in your standard of living. Therefore, this is an action I highly recommend to anyone who has a hishtalmut fund.
Step by step
- Employees – deposits to the hishtalmut fund come both from your net salary and from the employer’s pocket – therefore you need to get their approval to open one. The idea here is that for every shekel you deposit, the employer deposits three shekels!
- Self-employed – deposits to the hishtalmut fund come from your business income. Because of the tax benefits on hishtalmut funds, this is actually a highly worthwhile investment method (pay attention to your deposit amounts, and deposit as much as possible to enjoy the tax benefit.)
- Negotiate management fees – when purchasing a hishtalmut fund you can also negotiate management fees. The service won’t change and you’ll earn more.
- Choose the right investment track for your hishtalmut fund – like with pensions, hishtalmut funds can also be invested in different tracks. Compare the different tracks and check which track is suitable for you.
