Why study funds are often worth evaluating
A study fund offers a rare combination of tax benefits, medium-term liquidity, and market-linked investment tracks, which can make it an efficient savings layer when it fits the saver's situation.
Why study funds are often worth evaluating
Short to Medium Term Savings
6+Money can be withdrawn after 6 years for any purpose, or after 3 years for professional development purposes
Capital Gains Tax Exemption
0%Unlike any other investment - no 25% tax on profits up to the annual ceiling
Managed Investments
FreelancersMoney is invested in the capital market in various tracks, according to client choice
Study Fund for Freelancers - Tax Benefits
SavingsThe Study Fund is one of the most powerful financial tools for freelancers. Beyond being a medium-long term savings, it has tax benefits that make it important to evaluate carefully as part of a self-employed saver's annual plan:
The Importance of an Insurance Agent in Study Fund
Choosing the Right Company
SelectionTo compare companies by track policy, fees, service quality, risk level, and historical performance, without treating past returns as a promise.
Negotiating Management Fees
SavingsHere too there's tremendous significance on cumulative profits over the years
Investment Track Matching
CustomizedAccording to client needs - general track, equity, bonds, or green/technology track
Monitoring and Performance
TrackingTo monitor performance and make adjustments over the years
What a study fund actually is
A study fund (Keren Hishtalmut) is a regulated medium-term savings instrument with unique tax treatment. Within the annual deposit ceiling, profits are exempt from capital gains tax at redemption. It is liquid after a six-year holding period (or three years for accredited professional development).
Tax exemption up to the annual ceiling
Profits on deposits within the regulatory ceiling are exempt from capital gains tax at redemption, subject to the holding period and current law.
Six-year liquidity (three for education)
After six years, the balance can be withdrawn for any purpose. After three years, the balance can usually be withdrawn for accredited professional development.
Different rules for employees and self-employed
Employees deposit through payroll with an employer match. Self-employed deposit independently and benefit from a deductible-expense ceiling and a separate tax-exempt-profits ceiling.
Track-based investment
Like other regulated long-term products, the money is invested in one of several tracks. Track choice and fee level both materially affect outcomes.
Study Fund for Employees
Employees also deserve to benefit from a Study Fund - but here the deposit depends on an agreement with the employer:
Employer deposits from salary
EmployerEmployee adds from salary
EmployeeSaved from salary each month
TotalImportant to know: up to the current annual ceiling for employees, qualifying profits may be exempt from capital gains tax, subject to current law and the fund rules.
Study Fund for Freelancers - Tax Benefits
Deductible Expense
FreelancersA self-employed saver can deposit up to 4.5% of annual income, up to the current regulatory ceiling, as a deductible expense for income tax purposes. The ceiling is updated periodically and should be verified before deposit planning, since the binding figure is the one set by current law.
Tax Exemption on Profits
SavingsAs long as deposits stay within the current preferred ceiling, qualifying profits may be exempt from capital gains tax, subject to the holding period and current law. The current ceiling should be verified before making a deposit.
Who a study fund typically suits
Self-employed who can deposit annually
The deductible-expense rule plus the tax-exempt-profits ceiling make this one of the most efficient instruments available to self-employed in Israel.
Employees with an employer match
If your employer offers a study fund as part of compensation, declining is rarely the right answer — it is effectively additional gross compensation.
Households planning a 6-year goal
Renovation, a sabbatical, a downpayment in five-plus years, or any large planned outlay fits the holding window.
Self-funded continuing education
The 3-year window for accredited professional development can match a planned course or certification.
What this product is not
- Returns are not guaranteed. Performance depends on the chosen track and on market conditions.
- The product is not fully liquid in the short term. Early redemption can break the tax exemption depending on the situation.
- Annual deposit ceilings and tax thresholds are set by regulation and are subject to updates.
- Tax exemption applies up to the regulatory ceiling. Deposits above the ceiling are treated under the standard capital gains tax rules.
- Employee deposits depend on an agreement with the employer. There is no statutory right to a study fund for every employee.
Common mistakes I see with study funds
Opening a fund and never reviewing it
Track and fees are rarely revisited after the first signature. Six years is enough time for both to drift away from optimal.
Withdrawing the moment 6 years passes
If the cash is not needed, leaving the money in the fund preserves the tax exemption on future profits — often the better default.
Self-employed not depositing
Skipping the annual deposit forfeits both the deductible expense and the tax exemption on profits within the ceiling.
Choosing the cheapest fund instead of the right fund
Fees matter, but track quality, track diversity, and historical risk-adjusted performance also matter. Cheapest is not always best.
Using a study fund for short-term goals
Inside the 6-year window the money is not freely accessible without giving up tax benefits. Short-term needs belong elsewhere.
What I check before recommending a study fund
- Employee or self-employed status and the resulting ceilings and tax mechanics that apply this year.
- Whether the existing employer arrangement (if any) is competitive on fees and track variety.
- Existing exposure across pension, provident, savings policy, and study fund — to keep risk coherent across products.
- The household time horizon and whether the 6-year holding period is realistic.
- Track-switching rules and any minimum holding windows within a track.
- The current annual ceilings (deposit, deductible expense, tax-exempt profits) under current law.
What to bring to a study fund meeting
The right paperwork lets us run the actual numbers per fund instead of relying on memory.
- Most recent payslips (last 3) for employees, or annual income summary for self-employed.
- Latest statement from any existing study fund.
- Mislaka (clearinghouse) report when available — it consolidates all pension, provident, study fund, and insurance products.
- Tax return (Doch Shnati) for self-employed, especially if marginal tax bracket matters for the deposit decision.
- Any employer arrangement document if your employer already offers a study fund.
Self-employed should also note their planned annual deposit so we can model both the deductible portion and the tax-exempt-profits portion accurately.
Important note on tax, regulation and scope
- •The information on this page is general explanatory content. It is not personal investment, pension, or tax advice and is not a substitute for a personal review.
- •Returns are not guaranteed. Past performance does not guarantee future returns.
- •Annual deposit ceilings, deductible-expense rules, and tax-exempt-profits ceilings are set by regulation and are subject to updates by the supervisor of capital markets, insurance and savings, and by tax authorities.
- •The 6-year and 3-year withdrawal windows and the conditions for accredited professional development are set in the fund's regulations and current law.
- •Any decision to open, deposit into, switch tracks within, or redeem a study fund should be made only after a personal review and is subject to product terms and applicable tax law.
In Summary
A study fund can be one of the most tax-efficient savings products for eligible employees and self-employed savers, because it may combine tax benefits, capital gains tax exemption up to the ceiling, and market-linked investment tracks.
Like any financial instrument, it's important to manage it correctly: choose a suitable company, compare management fees, and match the investment track to the saver's goals and risk profile.
This is where the financial insurance agent comes into the picture, who accompanies the client and ensures the money really works for them in the most efficient way.
Frequently asked questions about study funds
No. A study fund (Keren Hishtalmut) is a medium-term tax-advantaged product with a six-year holding period and a tax exemption on profits up to the regulatory ceiling. An investment provident fund is liquid at any time and has a different tax treatment and an optional pension-track conversion at age 60.
No. The fund is invested in one of the issuer's tracks and is exposed to market risk. Past performance does not guarantee future returns.
After six years from the first deposit, the balance can be withdrawn for any purpose. After three years it can usually be withdrawn for accredited professional development. The exact rules are set in current law and the fund's regulations.
No. After the holding period the tax-exempt status of profits within the regulatory ceiling continues. Many savers choose to leave the balance invested rather than withdraw.
Employees usually deposit through payroll with an employer match, subject to the employer's arrangement. Self-employed deposit independently and benefit from both a deductible-expense ceiling and a tax-exempt-profits ceiling. The exact figures are set by regulation each year.
Yes. Track switches inside the same study fund are typically allowed and are not a tax event because no cash is redeemed. Specific rules are set in the fund's regulations.
No. It is general educational information. A binding recommendation requires a personal review of your specific situation, your existing products, your goals, current regulation, and applicable tax law.