The Account Your Employer Funds for You
If you are employed in Israel, you almost certainly have access to a קרן השתלמות (Keren Hishtalmut) — literally "study fund," though that name is a historical relic. Today it functions as Israel's premier short-to-medium term savings vehicle, and it has a combination of benefits that simply does not exist anywhere else.
Here is the core deal: your employer contributes 7.5% of your gross salary into the fund every month. You contribute an additional 2.5%. The money grows in a diversified investment portfolio, and after six years you can withdraw everything — principal, employer contributions, and all investment gains — completely tax-free.
How the Contributions Work
The split is set by law for salaried employees:
- Employer: 7.5% of your gross salary (this is money the employer pays on top of your salary — it does not reduce your take-home pay)
- Employee: 2.5% of your gross salary (deducted from your gross, so it reduces your taxable income slightly)
- Total: 10% of gross monthly, every month, automatically
The contribution ceiling that qualifies for tax exemption is updated annually. For 2025, the ceiling on the employer's tax-exempt contribution is approximately 188,544 NIS per year (roughly 15,712 NIS/month in salary). Contributions on salary above that ceiling are still allowed but taxed as income.
In practice: if you earn 20,000 NIS/month, your employer puts 1,500 NIS into your Keren Hishtalmut every month, and 500 NIS is deducted from your gross salary. Over a year, that is 24,000 NIS contributed — of which 18,000 NIS came from your employer at no cost to you.
Why Tax-Free Growth Matters More Than It Sounds
Most investment accounts in Israel are subject to a 25% capital gains tax on profits. Inside a Keren Hishtalmut, all capital gains, dividends, and interest accumulate with zero tax while the money is in the fund. When you withdraw after six years, you pay no tax on any of it.
Over a decade of contributions with moderate investment returns, the tax savings alone can amount to tens of thousands of shekels. Combined with the employer match — essentially free money — this is the highest guaranteed return available to any Israeli saver.
Self-Employed Options
Self-employed individuals (osek patur or osek murshe) can also open a Keren Hishtalmut and make their own contributions. The tax rules are slightly different: you can deduct contributions up to a set percentage of your income (approximately 4.5% of income up to a ceiling), and withdrawals after six years remain tax-free. The ceiling for self-employed is lower than for salaried employees, but the account still offers excellent tax efficiency.
If you freelance or are self-employed, speak to an accountant about the optimal contribution level — the deduction rules interact with your other business expenses and Bituach Leumi contributions.
Choosing a Fund Manager
Your employer typically has a default fund manager, but you can always transfer your Keren Hishtalmut to any licensed manager. The major providers include Meitav, IBI, Menorah, Harel, Altshuler Shaham, and Phoenix. They all offer a range of investment tracks, from aggressive equity to conservative bond-heavy portfolios.
Management fees vary and have a real impact over time. We cover this in the pension fees article, but the same logic applies: a 0.3% annual fee difference on 300,000 NIS over 10 years costs you roughly 9,000-12,000 NIS in lost growth. Always compare fees before selecting or staying with a manager.
What Happens Before Six Years
Before the six-year mark, the fund is "locked" for tax purposes. You can still withdraw early, but you will pay full income tax on the employer contributions and gains — losing the main benefit of the account. There is one partial exception: funds can be used for educational purposes (studies) after three years, under specific conditions. We cover the withdrawal rules in detail in the next article.
The Bottom Line
If your employer offers a Keren Hishtalmut and you are not enrolled, enroll immediately. Every month you delay is employer money you are forfeiting. If you are enrolled but have not chosen your investment track, check what you are invested in — the default is often a conservative "general track" that may not match your actual time horizon.