Study Fund (Keren Hishtalmut) — Overview

A study fund (keren hishtalmut) is the single most generous mainstream savings vehicle in the Israeli tax code. It is also the most underused, because eligibility depends on employer participation for salaried workers, and many self-employed savers do not realise they can open one independently. This overview explains the product, the 2026 limits, and the tax benefits in plain English.

What a Study Fund Is

Despite the name, a study fund is not earmarked for education. It is a six-year savings vehicle with a unique tax treatment: contributions within statutory limits are exempt from income tax on the way in, the investment returns inside the fund are exempt from capital gains tax (mas revach hon) on the way out, and the principal is tax-free at withdrawal. After six years of seniority (vetek), the entire balance — principal plus all accumulated gains — can be withdrawn with zero tax due. This is the only mainstream Israeli savings product with that property.

How It Works for Employees

For a salaried worker, a study fund is funded jointly. The employee contributes up to 2.5% of monthly gross salary, and the employer contributes up to 7.5%, for a combined 10%. The contribution base is capped at a monthly salary of 15,712 ₪ in 2026 — contributions are calculated only on salary up to that ceiling. Employer participation is not mandatory; it is negotiated as part of the employment contract or a collective agreement.

If the employer share exceeds 7.5%, the excess is taxed as ordinary salary at the employee's marginal rate, but the deposit itself still counts toward the six-year clock and continues to compound tax-free.

How It Works for the Self-Employed

A self-employed person opens a study fund independently with a pension management company or insurance company. The 2026 annual contribution ceiling is structured in two layers:

- A first slice equal to 4.5% of annual taxable profit, capped at 12,500 ₪ approximately, is deductible from taxable income on the way in. - A second slice equal to up to 2.5% of annual taxable profit (with combined deposits capped at approximately 19,920 ₪ per year on profits up to around 285,000 ₪) is not deductible on deposit but enjoys the full capital-gains exemption inside the fund and is tax-free on withdrawal after six years.

The exact ceiling figures are indexed annually by the Tax Authority, and the precise amounts for 2026 should be confirmed at the start of the tax year.

The Six-Year Clock

The seniority clock starts on the date of the first contribution. After six years from that date, the entire fund can be withdrawn tax-free, regardless of subsequent contributions. Funds opened before 2008 may have shorter vesting under transitional rules, but for any fund opened in the last two decades the rule is six years.

A useful side effect: once the fund is "mature," meaning the first deposit was more than six years ago, any new deposit is also available tax-free immediately on withdrawal, because the entire fund inherits the seniority status. This makes a mature study fund a flexible savings vehicle, not just a long-lock product.

Investment Tracks

Like pension funds, study funds offer a choice of investment tracks (maslulei hashkaa). The most common are:

- General (klali) — balanced equity and bond mix - Equity (mnayot) — predominantly equities - Bonds (igrot chov) — predominantly fixed income - Sectoral tracks — S&P 500, technology, ESG, sharia-compliant, etc.

Track choice is made when opening the account and can be changed at any time, free of charge.

Common Mistakes

Self-employed workers who skip the study fund entirely lose two stacked tax benefits: the deduction on deposit and the capital-gains shelter on the way out. Employees who decline employer matching, or who fail to ask for a study fund as part of compensation, leave salary on the table — 7.5% of salary in employer match is functionally a 7.5% raise, with tax-advantaged status.