Choosing a פוליסת חיסכון (polisat chisachon, a savings policy) has two layers for an oleh. The Israeli layer is unusually simple, because most of the decision comes down to one negotiated number. The second layer is a cross-border one a native never faces: if you hold a US passport, the pooled funds inside the policy interact with your home-country tax and reporting in ways that can flip the "obvious" Israeli choice. This guide keeps the two apart on purpose.
Read this before you fund anything
This article is general educational information, not tax, legal, or financial advice. Cross-border (US/UK) and Israeli tax interact in complex ways, and for an insurance-wrapper product like a savings policy the US treatment can be severe (PFIC, and possibly foreign-trust reporting, discussed below). Consult a qualified cross-border professional before opening or funding a savings policy.
What is a savings policy, and what are you choosing?
A savings policy is a medium-to-long-term investment product issued and managed by an insurance company and supervised by the Capital Market, Insurance and Savings Authority. You deposit a lump sum or a monthly amount, pick an מסלול השקעה (maslul hashkaa) (investment track), and the insurer's managers run the money. It looks a lot like a kupat gemel l'hashkaa, but with three differences that matter: there is no annual deposit ceiling, there is no tax break on the way in, and, crucially, there is no regulatory cap on the management fee. So you are really choosing three things at once: the insurer (which sets the fee), the track inside the policy, and whether the policy is an "umbrella" structure (more on that below).
The criteria that actually matter
In order of impact, here is what separates a good savings policy from an expensive one. This is company-free on purpose: we teach the criteria, and the named, side-by-side comparison lives in Reviews.
What to weigh when choosing a savings policy
- Management feeThe number you control, and unusually here there is no regulatory cap on it, so it is entirely a negotiation. A fee on the balance, sometimes plus a fee on deposits; a small gap compounds into large money over years.
- Investment trackMost policies are market-linked (general, equity, index, or conservative tracks); older legacy policies may carry a designated-bond component with a yield floor. Compare track to comparable track, not by marketing name.
- Liquidity and exit termsThe money is withdrawable at any time (subject to 25% capital-gains tax on the real gain, 2026), but check the contract for exit penalties or a lock-in period.
- Umbrella structure and tax mechanicsAn umbrella (matriya) policy lets you switch the investment manager inside the same policy with no redemption and no tax event; moving between two insurers is a redemption and is taxed on the real gain.
- Insurer stability and serviceTrack record, assets under management, a working app to see your balance and switch tracks, a clear annual statement. Secondary to the fee, but it shapes the day-to-day.
Where a savings policy fits (and when to skip it)
A savings policy has no tax advantage on entry, so for a lifelong Israeli it is usually the vehicle you reach for after you have already filled the tax-advantaged ones: the pension fund, the keren hishtalmut, and the kupat gemel l'hashkaa up to its annual ceiling. It is a natural home for a large one-off sum, an inheritance, a bonus, or the proceeds of an asset sale, that you want managed but liquid, without locking it until retirement. For a US person, that sequencing logic breaks: because the wrapper and its pooled funds create US tax and reporting friction, "extra managed savings" is exactly where a US oleh should pause and get advice before defaulting to this product.
Israeli tax treatment (the same for everyone here)
Inside the policy, gains accumulate with no current Israeli tax. When you withdraw, Israel levies 25% capital-gains tax on the real (inflation-adjusted) gain, not on your principal, and only at withdrawal, so the tax is deferred and the whole balance, including the part that will eventually become tax, keeps compounding. There is no annuity obligation: you can take the money as a lump sum, which is what separates it from an insurance-based pension product like managers insurance (bituach menahalim), whose payout is built around a lifetime annuity. Two switching rules matter. Changing the investment track inside the same policy is never a tax event. Moving your money from one insurer to another, by contrast, is a redemption of the old policy, and therefore a capital-gains event, because a savings policy has no statutory transfer (niud) mechanism between insurers the way pension products do. This part is identical whether you were born in Haifa or landed last year.
US-person treatment: the catch a native never faces
Almost every new US oleh is blindsided that a US filing duty does not end at the airport. US citizens and green-card holders file US returns on worldwide income for life, and a savings policy raises several US issues that have nothing to do with Israeli law:
- PFIC. A savings policy holds pooled investment funds, and a non-US pooled fund is generally a PFIC for US persons. The default Section 1291 regime taxes gains punitively and requires Form 8621. That reporting can apply to the funds inside the policy even though you never see them separately.
- The insurance wrapper is an extra, unsettled layer. Because the product is issued as an insurance contract rather than a plain fund, US tax may look through to the underlying PFICs, or, depending on the contract, treat the arrangement as a foreign grantor trust with its own reporting. Which analysis applies is genuinely unsettled and handled product by product, which is exactly why you want a cross-border professional rather than a blanket rule.
- The Israeli deferral may not carry over. "Taxed only on withdrawal" is an Israeli statement. If the wrapper is treated as a foreign grantor trust, or if you make a mark-to-market or QEF election on the PFICs, you can owe US tax on the fund's gains in a year you withdrew nothing; under the default Section 1291 regime the tax instead lands as a punitive charge on distributions and disposals. Either way the clean Israeli deferral does not reliably survive on your US return.
- FBAR and FATCA. The policy is a foreign financial account: it counts toward the FBAR (FinCEN 114) $10,000 aggregate across all your non-US accounts, and it may require FATCA Form 8938 with your US return above its own thresholds.
Here is the concrete inversion: the "obvious" native move, park a large sum in a low-fee market-linked savings policy and let the tax defer, is often the worst move for a US person, because the compliance cost and potential current tax can exceed the benefit of the Israeli deferral. If you are a US person, treat the savings policy as a decision to make with a cross-border advisor, not a default.
Switching insurers without a surprise tax bill
This is where the umbrella (matriya) structure earns its keep. An umbrella policy is a savings policy from one insurer under which several investment houses can manage the money, so you can change the manager inside the same policy with no redemption and no Israeli tax event. It answers a question that trips up newcomers: why pick an insurer that offers an umbrella rather than simply the one with the highest past return? Because if you choose a non-umbrella policy and later want a different manager, you have to redeem and pay 25% capital-gains tax on everything gained so far. Past return is weak evidence of future return; the umbrella structure is a permanent feature you control. For US persons, note that even an internal switch can be a US-reportable event depending on the mechanics, so loop in your advisor.
Comparing policies, company-free
Because the fee is uncapped and negotiable, the comparison is mostly about that number and the structure around it. These are illustrative example insurers, not real names; the named, side-by-side comparison is in Reviews.
| Criterion | Insurer A | Insurer B | Insurer C |
|---|---|---|---|
| Fee on balance (2026, negotiable) | 0.60% | 0.95% | 1.50% |
| Umbrella (switch manager, no tax event) | Yes | Yes | No |
| Low-cost index track | Yes | Yes | No |
| Liquidity / exit terms | No penalty | No penalty | Early-exit penalty |
| Deposit ceiling | None (never exists here) | None | None |
Worked example: what the fee gap costs
Say you move a 300,000 NIS inheritance into a savings policy for 15 years at a 5% gross return. At a 0.5% fee the balance grows to roughly 580,000 NIS; at a 1.5% fee it reaches only about 503,000 NIS. That is a gap of nearly 78,000 NIS on the same deposit, driven entirely by a fee with no regulatory cap, which is precisely why the fee is the number worth negotiating. For a US person, add the PFIC layer on top: the reporting cost and potential current tax can erode or reverse that Israeli advantage. Illustration only, not a forecast; the actual return depends on the specific track and market outcomes.
Common mistakes olim make here
- Leaving the fee wherever the insurer set it. There is no cap, so an un-negotiated fee can be double a competitive one.
- Choosing by last year's return instead of the track type, the fee, and the umbrella structure, the things you actually control.
- (US persons) Defaulting into a savings policy for "extra managed savings" without pricing the PFIC and possible foreign-trust reporting. Cheaper and simpler in Israel can be expensive and complex in the US.
Which situation is yours?
Compare savings policies
Management fees, investment tracks, umbrella structure, and liquidity terms, in Meidahon's independent side-by-side comparison.
See the comparison
Choosing a savings policy (polisat chisachon) as an oleh has two layers. The Israeli layer is simple: it is an insurance-company investment wrapper with no deposit ceiling, no tax break on entry, and, unusually, no regulatory cap on its management fee, so the decision is mostly one negotiated number plus the track and whether it is an umbrella (matriya) structure that lets you switch manager without a tax event. Gains are taxed as 25% capital gains on the real gain, only at withdrawal, and there is no annuity obligation. The cross-border layer applies mainly to US citizens and green-card holders: the policy holds pooled funds that are generally PFICs (Form 8621, punitive Section 1291), the insurance wrapper can add foreign-trust reporting, gains may be US-taxable before withdrawal, and the account counts for FBAR and FATCA, so the compliance cost can exceed the Israeli benefit. This is general information, not advice.
The management fee. A savings policy is unusual in that there is no regulatory cap on the fee (unlike a pension fund or a kupat gemel), so it is entirely a negotiation, and it is the one number you know in advance and control. Because the fee is deducted from the balance before your return is calculated and compounds over years, a small gap becomes large money. After the fee, weigh the investment track and whether the policy is an umbrella structure that lets you change the investment manager without a tax event.
Gains are taxed as capital gains at 25% on the real, inflation-adjusted gain (2026), not on your principal, and only when you withdraw, so the tax is deferred and the whole balance keeps compounding. There is no tax break on the way in and no annuity obligation, so you can take the money as a lump sum whenever you like. Switching the investment track inside the same policy is not a tax event, but moving between two insurers is a redemption and therefore a capital-gains event.
US citizens and green-card holders file US returns on worldwide income for life, regardless of Israeli residence. A savings policy holds pooled investment funds, which are generally PFICs (Passive Foreign Investment Companies) reported on Form 8621 under the punitive Section 1291 regime, and the insurance wrapper can add foreign-trust reporting on top. Depending on the wrapper’s treatment and any PFIC election, gains can even be US-taxable in a year you withdrew nothing, so the Israeli tax deferral does not reliably carry over. The account also counts toward FBAR and FATCA. Because the analysis is unsettled and product-specific, US olim should get cross-border advice before funding one.
An umbrella policy is a savings policy from one insurer under which several investment houses can manage the money. It lets you change the investment manager inside the same policy with no redemption and no Israeli tax event, because the legal identity of the savings, the policy at the insurer, stays the same. Without an umbrella, moving to a different manager means redeeming the policy and paying 25% capital-gains tax on everything gained so far. That is why the umbrella structure, a feature you control, often matters more than a percentage point of past return.
Usually no. A savings policy has no tax advantage on entry, while a keren hishtalmut and a kupat gemel l’hashkaa carry meaningful tax benefits, so most people fill those first and use a savings policy for money beyond their ceilings, or for a large one-off sum they want managed but liquid. For US persons the ordering matters even more, because the savings policy’s PFIC and wrapper issues make it one of the least US-friendly places to put extra money.
No. Unlike pension products, a savings policy has no statutory transfer (niud) mechanism between insurers, so moving your money from one insurer to another is a redemption of the old policy and therefore a 25% capital-gains event on the real gain. The tax-free ways to change course are internal: switch the investment track inside the same policy, or, if it is an umbrella policy, switch the investment manager without redeeming. For US persons, even these internal moves can be US-reportable depending on the mechanics.
