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Israeli Pension Fee-Impact Calculator for Olim
Israel charges TWO pension fees a 401(k) never does: a load on every deposit and a yearly fee on the balance. See which one costs you more over your horizon, and what negotiating is worth.
Your Israeli pension is mandatory and automatic. Once you are an employee, your employer must open one and pay in 18.5% of your salary. What no one explains to a newcomer is that the fund takes two separate management fees, not one. There is a load on every single contribution (the deposit fee), and there is a yearly fee on your whole balance (the accumulation fee). A US 401(k), IRA or UK SIPP charges an expense ratio on the balance and essentially never a load on contributions, so the deposit fee is a mechanism most olim have never seen and never think to question.
This calculator splits the drag so you can see both fees separately. Set your horizon, salary and expected return, then your current fees and the fee you think you could negotiate to. The tool shows the drag as a share of your final pot and a rough cost per year, which of the two fees is currently costing you more, and how that flips as the horizon changes. Over a short horizon the deposit fee dominates; over a long one the accumulation fee takes over.
Because most olim start mid-career with 15 to 25 accrual years rather than a full 40, the horizon is the single most important input here. Two things are worth knowing before you use the numbers: fees in Israel are individually negotiable, unlike a fixed US plan fee, and if you are a US person there is a separate PFIC layer to weigh. Estimate the PFIC tax drag for US olim before you commit to a voluntary savings vehicle.
Your mandatory Israeli pension
In Israel your employer must enrol you and pay in automatically. Contributions total 18.5% of salary (6% employee, 6.5% employer, 6% severance). Unlike a US plan, the fund charges TWO fees: a load on every deposit and a yearly fee on the balance. Both are individually negotiable.
Years of contributions left until retirement
22 years
Gross monthly salary
₪20,000
Assumed net real annual return
4%
What you pay now
Deposit fee (% of each contribution)
Statutory cap: 6%
Accumulation fee (% per year)
Statutory cap: 0.5%
The fee you could negotiate to
Deposit fee (% of each contribution)
Default-fund band: ~1.0%
Accumulation fee (% per year)
Default-fund band: ~0.22%
Over 22 years, management fees shrink your pension pot by about
7.6%
versus paying no fees, or roughly ₪5,382 per year on average.
Illustrative total over the period, in today's terms: ₪118,404. This assumes every input stays flat for 22 years, which it will not, so read it as a ballpark.Which of the two fees is costing you more
₪61,490
Cost of the deposit fee (the one no US plan charges)
₪56,913
Cost of the yearly accumulation fee
Deposit fee 52%Accumulation fee 48%
Over your 22-year horizon, the deposit fee is currently the bigger drag. Shorten the horizon and the deposit fee dominates, because it is taken up front before anything can compound; lengthen it and the accumulation fee takes over, because it is charged every year on a balance that keeps growing. For most olim the two cross over somewhere around 20 to 25 years, right where a mid-career horizon sits.
The assumptions behind this number
salarycontribution ratefeesnet return
To show a single number, this calculation assumes the values below stay fixed for the whole period (22 years). In reality they will change, so treat the result as a ballpark, not a precise forecast. Amounts are shown in today’s terms, not adjusted for inflation. The net real return is the single biggest lever here, and it is the one number nobody can promise. The statutory caps and the default-fund band are revisable regulation: the provident-fund (kupat gemel) accumulation cap already moved from 1.1% to 1.05% in 2014, the current default-fund tender only runs to 2028, and the industry-average fee has fallen steadily and is a moving target.
What negotiating is worth
Final pot with no fees
₪1,567,393
Final pot at your current fees
₪1,448,989
Final pot at the fee you could negotiate
₪1,509,328
Gain from negotiating (illustrative)
₪60,339
If you are a US citizen or green-card holder
The fee maths above is the same for you, but there is a second, US-only layer. A kupat gemel and a keren hishtalmut are arguably PFICs, and the US-Israel tax treaty does not defer the Israeli growth for a US person, so Israel's oleh exemptions have zero effect on your US bill. A keren hishtalmut is tax-free in Israel after its holding period but is still taxable to the US. Weigh that alongside the fee before you pick a voluntary savings vehicle. Estimate the PFIC tax drag for US olim.
The deposit fee is the mechanism you have never seen
A 401(k), IRA or SIPP charges an expense ratio on your balance and essentially never a load on every contribution. An Israeli pension fund charges both. The deposit fee quietly skims a percentage off every paycheck contribution before it is ever invested, so it never shows up as a line on a balance statement. Because an oleh has never met it, it is the fee most people forget to negotiate.
It is mandatory and automatic, not opt-in
You do not choose whether to join. Once you are an employee your employer must open and fund a pension for you, paying in 18.5% of salary in total. That is a good thing, but it also means the fund is chosen for you by default unless you actively pick one, and the default you are handed is not always the cheapest.
Fees are negotiable in Israel, unlike a fixed US institutional fee
A US plan's expense ratio is fixed by the plan. In Israel the fee is a starting point you can push down, and moving to a cheaper arrangement is your right at any time. Three generic reference tiers frame the room you have (July 2026): the statutory cap on a comprehensive fund is 6% on deposits and 0.5% a year on the balance; the industry average actually charged was about 1.63% on deposits and 0.16% on the balance at the end of 2023; and the government default-fund band, valid from November 2024 to October 2028, runs up to about 1% on deposits and 0.22% on the balance.
Why the accumulation fee looks small but is not
The industry-average accumulation fee, about 0.16% at the end of 2023, is actually lower than the 0.22% default-fund ceiling, because accumulation fees have fallen across the market for a decade. That is why the default-fund band's real value for a newcomer is mainly its low deposit-fee ceiling and its ten-year price lock, not its accumulation number. Over a long horizon even a 0.1% difference on the balance compounds into a large sum.
Other Israeli savings vehicles charge on the same two axes
The same deposit-plus-accumulation structure appears elsewhere with different caps. A provident fund (kupat gemel) is capped at 4% on deposits and 1.05% a year on accumulation (the accumulation cap moved down from 1.1% in 2014). A keren hishtalmut is capped at 2% a year on accumulation. When you compare offers, compare both axes, not just the headline one.
- Capital Market, Insurance and Savings Authority: pension management-fee caps, the industry-average fee report, and the selected default-fund tender. gov.il ↗ ↩Last verified: 2026-07-10
- Israel Tax Authority: mandatory pension contributions and the tax treatment of pension and provident savings. gov.il ↗ ↩Last verified: 2026-07-10
- IRS, About Form 8621: the PFIC treatment relevant to US-citizen olim holding Israeli pooled savings vehicles. irs.gov ↗ ↩Last verified: 2026-07-10
- US-Israel income tax treaty documents. irs.gov ↗ ↩Last verified: 2026-07-10
שתפו:
Frequently asked questions
The deposit fee (dmei nihul mehafkada) is a percentage skimmed off every contribution before it is invested. The accumulation fee (dmei nihul mitzvira) is a percentage taken each year from your whole balance. A US or UK plan charges only the balance-based fee, so the deposit fee is the unfamiliar one. Over a short horizon the deposit fee usually costs more, because it is taken up front; over a long horizon the accumulation fee costs more, because it is charged every year on a growing balance.
On a comprehensive pension fund the statutory cap is 6% on each deposit and 0.5% a year on the balance (July 2026). In practice the industry average actually charged was far lower, about 1.63% on deposits and 0.16% on the balance at the end of 2023, and the government default-fund band, valid from November 2024 to October 2028, runs up to about 1% on deposits and 0.22% on the balance. A provident fund (kupat gemel) has its own caps of 4% and 1.05% a year, and a keren hishtalmut is capped at 2% a year on the balance.
Yes. Unlike a fixed US institutional fee, the Israeli fee you are first offered is a starting point, and you can push it down or move to a cheaper arrangement at any time. Many olim never do this simply because they do not know it is allowed. Use the industry average, the statutory cap and the default-fund band as reference points for how much room you have, then ask.
Because a single far-future shekel figure pretends the world stays frozen for decades, and it will not. Returns vary, fees change, and the caps and default-fund band are revisable regulation, the provident-fund accumulation cap already dropped from 1.1% to 1.05% in 2014, and the current default-fund tender expires in 2028. A relative figure (the share of your pot lost to fees) and a rough cost per year are more honest ways to see the impact. The absolute total is shown only as an illustration, in today's terms.
The fee maths is the same, but there is an extra US-only layer. A kupat gemel and a keren hishtalmut are arguably PFICs, and the US-Israel tax treaty does not defer the Israeli growth for a US person, so Israel's ten-year oleh exemption has no effect on your US tax. A keren hishtalmut is tax-free in Israel after its holding period but is still taxable to the US. Weigh the PFIC cost alongside the fee before choosing any voluntary vehicle.
Related reading
The PFIC problem for US olim
Why ordinary Israeli pooled savings vehicles can be a US tax trap, and the compliant ways to invest instead.
Understanding your Israeli payslip
Where the mandatory pension and study-fund deductions show up, and what each line means.
The tax-advantaged account order for olim
Which accounts to fill first when you straddle the US and Israeli tax systems.
Related tools
PFIC Tax-Drag Estimator
Estimate the extra US tax a US citizen or green-card holder pays by holding an Israeli pooled fund (a PFIC) instead of a compliant US-domiciled ETF.
Pension Comparison Tool
Compare your home-country retirement accounts (401k, IRA, SIPP) with Israeli pension vehicles - Keren Pensia and Keren Hishtalmut - and see projected values at retirement.
Should I Transfer My Retirement Account?
Decision tree to help you decide whether to transfer your 401(k), IRA, or pension to Israel.
- Pension management-fee caps, industry-average fees, and the selected default-fund tender — Capital Market, Insurance and Savings Authority gov.il ↗ ↩
- Mandatory pension contributions and the tax treatment of pension savings — Israel Tax Authority gov.il ↗ ↩
- About Form 8621, the PFIC information return relevant to US-citizen olim — Internal Revenue Service irs.gov ↗ ↩
- US-Israel income tax treaty documents — Internal Revenue Service irs.gov ↗ ↩
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