Optimize your Israeli pension in 3 steps

Last Updated on June 14, 2026

I get it… pension is a really boring topic! But for the overwhelming majority of Israelis, it is also your most important investment account. And just a little bit of effort can lead to hundreds of thousands of additional NIS at retirement. So don’t delay this any longer. Work through these three steps now, and decades later you’ll be thankful when you have a much more comfortable retirement.

This guide will not be a comprehensive overview of the many intricacies of the Israeli retirement system or every unique situation. Rather, it is a focused and simple framework young professionals can use to make immediate improvements. As always, nothing in this guide should be viewed as specific investment, pension, or tax advice. Speak to a licensed pension agent for personal advice and help implementing each step, while keeping in mind the caveats discussed below.

Step 1: Is your money going in and not out?

Review your monthly or quarterly statements and confirm that the correct amounts are going in. In the example quarterly statement below, you can see in the bottom section, “פירוט ההפקדות לקרן הפנסיה,” the breakdown of your monthly salary (משכורת), employee contributions (תגמולי עובד, about 6%), employer contributions (תגמולי מעסיק, about 6.5%), and severance contributions (פיצויים, about 8.33%). Is the money going in as it should? If not, a discussion with your boss or HR department is in order. If your company may be having cash-flow issues, this is especially something you want to keep an eye on.

The severance portion of your pension (פיצויים) is a vital part of your retirement savings, and it is something you likely want to avoid touching. Withdrawing it when you leave your job can result in significant tax penalties at retirement and should be avoided if at all possible. In most cases, this means choosing the default option of “רצף קצבה” when leaving a job.

In other words, during your working years, always make sure money is going into the system and not out of it!

Step 2: Fees, Fees, Fees

Tiny numbers can have massive impacts. When fees come out of your pension, it’s not just about the amount that was deducted. It’s also the fact that this money can no longer work for you and compound over decades. A fraction of a percent difference in fees can add up to hundreds of thousands of NIS at retirement.

There are two main negotiable fees to focus on:

• דמי ניהול מהפקדה – This is the percentage management fee deducted from the monthly deposits made by both you and your employer. This money is taken out before the funds arrive in your pension account.
• דמי ניהול מחיסכון – This is the annual percentage management fee deducted based on the total balance, or value, of your pension account. This is also known as an Assets Under Management fee.

When negotiating to reduce fees, either through your pension agent or directly with the investment houses, you will likely need to accept a higher fee in one category in exchange for a lower fee in the other. As a very general rule of thumb:

• When you first start working – The most critical fee to lower is the deposit fee (דמי ניהול מהפקדה), since your actual account balance is relatively small at the beginning of your career. Your goal should be to keep דמי ניהול מהפקדה at or under 1%, even if you have to accept a higher annual fee, up to 0.22%
• Once you have been working for 5 or more years – You should shift your focus to keeping the annual assets fee (דמי ניהול מחיסכון) at or under 0.1%, even if you have to accept a deposit fee in the 1-1.7% range. If you earn 20K or more per month, you should be able to get the annual asset fee down to 0.05%.

These numbers may feel a bit overwhelming, but this step is critical. Ask your current pension agent for the fees you want. If they can’t or won’t help, you can switch to an investment house with better fees, either directly or by switching to a new agent. Don’t underestimate these tiny percentages. The differences can be huge!

Step 3: Choose your investment track

If you haven’t invested before, this step can be tricky and maybe even a bit scary. Investing involves risk, and dealing with both the daily ups and downs of the stock market and occasional market crashes may feel like the choppy waters you want to avoid. But a slightly bumpier trip can change the destination dramatically.

Since we are keeping things simple in this guide, we aren’t going to run through all the market data or help you build the psychological tools for choosing a plan and sticking with it through thick and thin. But when you have decades or more until retirement, the difference between one track and another can easily be millions of NIS at retirement. The most basic and critical investment decision is what percentage of your portfolio you will put into bonds versus what percentage you will put into stocks. Stocks are a lot more volatile in the short term, but generally a lot more profitable in the long term. See this simple, yet powerful example:

There are no guarantees about what will happen in the future. But if we look to the past as our guide, over the long term it has been much more profitable to be an owner of a diversified portfolio of businesses through a stock fund than to be a lender to many businesses through a bond fund. Looking at 100+ years of market data, this pattern has been consistent for long-term investors. What’s happening today in the news or the markets isn’t the most relevant factor. The number of years you have until retirement is.

Most investment companies offer different pension tracks that fall into one of these three categories:

For the vast majority of workers with 20 or more years until retirement, one of the stock tracks is very likely to be a better choice than any of the other tracks. This obviously assumes you can stick with it without panicking during inevitable market downturns. Don’t just rely on the default track you are placed in. Do your research and choose the track that makes the most sense for you. You can make changes directly on your pension fund’s website (שינוי מסלול) or by asking your agent to make the change for you. We are talking millions here.

Ensure your employer signs a form giving permission to change the investment track of your pitzuim. Otherwise, your pitzuim may remain in your old track.

Bonus – Avoid the pension agent horse race

Your pension agent makes money every time you switch investment companies. This creates a very clear incentive to switch customers from one company to another, and there is often very little transparency about that conflict shared with the client. Therefore, you should:

• Be wary of those who convince you to move based on past returns – The past five years tell you nothing about the next five years. Many pension agents in Israel reference recent returns as an incentive to move, even though this is a mostly meaningless metric.
• Be wary of those who argue that a more expensive plan makes more sense for you.
• Educate yourself. If you made it this far in the article, you are well on your way! Understand what matters when it comes to pension and go into the meeting knowing what you want.

How do I learn more?

If I haven’t bored you to death yet and you’re ready to dive deeper, here are some other great resources on these topics.

• The Comprehensive Guide To Pensions And Retirement In Israel
• The Ultimate Guide to Keren Hishtalmut
• Pension and Keren Hishtalmut Masterclass (paid)