A self-employed study fund (Keren Hishtalmut) is one of the most popular savings vehicles for self-employed people in Israel, mainly because of the tax benefits it carries. That said, it is not a substitute for a pension. The most common mistake I see is that self-employed people route all their savings into a study fund instead of splitting between a study fund and a pension. This article walks through the framework, what tax benefits actually mean in practice, when withdrawals are allowed, and why it is worth coordinating both products together.
What a self-employed study fund is
A self-employed study fund (Keren Hishtalmut) is savings managed by an institutional provider across a choice of investment tracks. Deposits may qualify for tax relief within income-based and annual limits. Withdrawal for any purpose is normally possible after six years from the first contribution; the gains exemption applies to eligible deposits and qualifying withdrawals.
Why it's a popular savings tool
- Tax benefit on the deposit side: part of the annual deposit is recognised as an expense (a deduction) for income-tax purposes up to an annual ceiling, subject to the Israel Tax Authority's rules.
- Tax benefit on the gains side: accumulated gains can be exempt from capital-gains tax if the annual deposit stayed within the statutory ceiling and the withdrawal waiting period was respected.
- Flexibility in choosing the investment track and in mixing tracks.
- Can be combined with other savings vehicles — pension, provident fund for investment, private savings — without interfering with them.
Tax benefits — carefully, without promises
The self-employed benefit is built from two tracks that work together — not from a mix of recognised expense and tax credit. On the deposit side: part of the annual deposit is recognised as an expense for income-tax purposes, up to a percentage-of-income ceiling and an absolute annual shekel ceiling. Your actual tax saving depends on your marginal tax rate, so it is personal and not uniform. On the gains side: the gains that accumulate in the fund can be exempt from capital-gains tax if your annual deposit stayed within the statutory ceiling and you respected the withdrawal waiting period.
The exact deposit ceiling for the deduction, the deposit ceiling for the capital-gains exemption, and the recognised percentage of income — are updated yearly by the Israel Tax Authority and need to be verified against your specific tax year. A licensed accountant or tax adviser can model the exact calculation against your income and personal situation. We help you understand what to check, but we do not replace the tax professional.
When you can withdraw
A fund normally becomes liquid six years from the first contribution, under the applicable seniority rules. The gains exemption is subject to the eligible annual deposit ceiling. Withdrawal after three years may qualify for recognised training or after reaching retirement age, subject to conditions. There is no obligation to withdraw when the fund becomes liquid.
- After 6 years — standard withdrawal without capital-gains tax (subject to having stayed within the ceilings on deposit).
- After 3 years — withdrawal possible for a recognised professional training purpose, under defined conditions.
- At retirement age — additional withdrawal options, subject to rules that vary between products.
- Leaving the money in — it keeps growing under the benefits, and there is no obligation to withdraw.
What happens if you withdraw early
A withdrawal before the standard date (usually before 6 years) is subject to tax. The tax applies to gains and sometimes to part of the principal, under the tax authority's rules. The benefit on the amount withdrawn is also lost. If you are even considering an early withdrawal, it is worth doing it only after understanding the full tax implications.
Investment track and risk
As with a pension fund, a Keren Hishtalmut offers multiple investment tracks. Self-employed savers who start young can often take more risk over time, but the decision also depends on other savings and on personal tolerance. Switching tracks is usually possible without a penalty, but you should read the specific fund's regulations.
- General track — the default in most funds, balanced exposure.
- Equity track — more volatile, with higher long-term return potential, suited to a longer horizon.
- Conservative / bond track — less volatile, suited to those nearing a withdrawal date.
- Thematic tracks (international, index, halacha-compliant) — subject to availability in the specific fund.
Management fees
Study funds charge management fees on the accumulated balance, not on deposits. Compare the quoted rate, how long any discount lasts and the total costs shown in the reports, alongside the investment track and service. A qualifying transfer between study funds preserves seniority; confirm the transfer conditions and liquidity date before moving.
Both self-employed and salaried
If you are both self-employed and salaried, your employer may already contribute to a Keren Hishtalmut as part of your employment terms. In that case the self-employed deposit is on top, and it is still subject to the annual ceilings. The tax benefit is calculated based on your total income. Coordinating in advance with an accountant or tax adviser before year-end can save you from a mistake.
How to combine with pension — not instead of pension
A Keren Hishtalmut is not a substitute for a pension. It does not provide a monthly annuity at retirement, it does not include built-in survivors and disability cover, and it has a different savings horizon — sometimes 6 years, sometimes longer. The pension is the long-horizon protection, and a study fund is a flexible vehicle that complements it. Most self-employed people I meet are better off using both products together — not choosing between them.
Want to understand the right split between pension and study fund?
The self-employed pension article explains the 2026 statutory obligation — and that complements the decision of how much to also deposit into a study fund beyond it.
Read the self-employed pension guideWant to check your study-fund deposits before year-end?
I'll go over your existing products, management fees and the split against your pension — no savings promises, no pressure.
Message me on WhatsAppFrequently asked questions about the self-employed study fund
Is a self-employed person required to open a study fund?
No. Unlike a pension, there is no statutory requirement to open a Keren Hishtalmut. That said, the tax benefits and the protection from capital-gains tax after the waiting period make it a worthwhile savings vehicle for most self-employed people.
Does a study fund replace a pension?
No. A Keren Hishtalmut does not provide a monthly annuity at retirement, does not include built-in survivors and disability cover, and has a different horizon. The pension is the long-term protection. A study fund complements it but does not replace it.
When can a study fund be withdrawn?
Normally after six years from the first contribution, under the seniority rules. The gains exemption is limited to eligible deposits. Withdrawal after three years may qualify for recognised training or after retirement age, subject to conditions. You can also leave the money invested.
Can I deposit any amount?
You can deposit above the amounts eligible for tax relief. The ceilings limit the deduction and the exemption on gains; they are not an overall contribution cap. Gains on excess contributions may be taxable. Check the limits for the relevant tax year and the fund terms.
How do I choose an investment track?
The decision depends on age, goals, the horizon until a possible withdrawal and your tolerance for volatility. Self-employed savers starting out can sometimes take more risk, but no single track fits everyone. It is worth checking the specific fund's regulations and reviewing the options.
What should I check on management fees?
Compare fees on the accumulated balance — study funds do not charge a management fee on deposits. Also check the discount period, total reported costs, investment track and service. Confirm that seniority and the liquidity date are preserved before a transfer.
Short summary
A self-employed Keren Hishtalmut is a powerful savings tool in Israel, but it does not stand alone. A thoughtful split between pension and study fund is usually the right move — based on that year's tax ceilings, on income and on personal horizon. It is worth coordinating with a licensed accountant or tax adviser before year-end.
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