Keren Hishtalmut (study fund)
4 min read
Keren Hishtalmut (קרן השתלמות) is one of the most tax-efficient savings vehicles available in Israel. It began as a fund for professional training and development, and over time it became a general medium-term savings account that millions of Israelis use. This guide explains what it is, how money goes in and comes out, the tax benefits, and what to look at when you compare funds.
What a study fund is
A study fund is a savings account managed by an investment house or an insurance company. Money is paid in every month, the fund invests it in the financial markets according to the track you choose, and the balance grows over time. Both salaried employees and self-employed people can hold one. For an employee it is a workplace benefit: the employer and the employee each pay in a share of the salary every month. A self-employed person can open a fund independently and pay into it directly.
How it is funded
For a salaried employee the common split is that the employer pays up to 7.5% of the gross salary into the fund and the employee pays 2.5%, together up to a salary ceiling set each year. The employer's part is a real addition to your pay, which is why a study fund is usually one of the most valuable benefits a job can offer. A self-employed person decides how much to deposit, up to an annual ceiling, and part of that deposit is recognised as a business expense for tax.
The tax benefits
Two tax breaks make the study fund unusual. First, contributions up to the legal ceiling are exempt from income tax when they go in. Second, the profits the fund earns are exempt from capital-gains tax when you withdraw, as long as the fund has reached the required age. In an ordinary investment account you pay 25% tax on real gains; inside a study fund, within the ceiling, you pay nothing. For a salaried employee the benefits apply to deposits of up to 10% of salary, on a monthly salary ceiling of ₪15,712, which works out to about ₪1,572 a month in total contributions. Deposits above the ceiling lose the exemption on the excess, so it helps to know where the ceiling falls.
The six-year rule and liquidity
The money in a study fund becomes fully available after six years. From that point you can withdraw the whole balance, profits included, without paying tax. You do not have to take it out: many people leave the fund open and let it keep growing tax-free for years or decades, treating it as a long-term investment. There is also a shorter route, since after three years the money can be withdrawn tax-free if it is used for approved professional training. Withdrawing early for any other reason means losing the tax benefit and paying tax on the gains.
Investment tracks
Every study fund offers several tracks, and you choose the one that matches how much risk you are willing to take. A general track holds a mix of shares and bonds; an equity track holds mostly shares and moves more sharply; a bond or money-market track is steadier; and there are index-tracking and religiously-compliant tracks as well. You can move between tracks inside the same fund without creating a tax event, so an early choice does not lock you in.
Management fees
The fund charges a management fee, taken as a yearly percentage of your balance, and some funds also charge a fee on each deposit. The fee is capped by regulation, but most people pay less than the cap, and it can be negotiated, especially once your balance is large. Because the fee is charged every year on the whole balance, a difference that looks tiny turns into real money over ten or twenty years.
How to compare study funds
When you compare funds, look past a single strong year. Check the net return over three, five and ten years, so short-term luck does not decide for you, and put that next to the management fee, since a high fee eats into every year's return. Make sure you are comparing funds in the same track, because an equity track and a bond track are not the same product. You can compare every study fund on this site using official regulator data.
General information only, not advice. Sources: official Capital Market Authority data and Kol-Zchut.