Keren Hishtalmut

A Keren Hishtalmut ("education fund") is an Israeli medium-term savings vehicle with a significant tax advantage: capital gains are exempt from tax on deposits up to an annually set ceiling, provided funds remain locked for at least six years.^[1] Although created in 1962 to finance teachers' continuing education, it is today used broadly as a general investment wrapper.^[2]

How it works

Employees typically contribute 2.5 percent of salary with the employer adding 7.5 percent, up to the tax-recognised ceiling. Self-employed individuals may deposit up to a separate annual ceiling and deduct part of the deposit as an expense. After six years (three for the self-employed and those over retirement age) the money becomes liquid, and gains on qualifying deposits are exempt from the 25 percent capital-gains tax that otherwise applies.^[1]

Investment tracks

Keren Hishtalmut assets are managed by investment houses and banks in tracks ranging from money-market to equity-heavy portfolios, similar to Kupat Gemel tracks. Holders may switch tracks and managers without triggering a tax event.^[3]

Regulation

The product is supervised by the Capital Market, Insurance and Savings Authority, not by the Israel Securities Authority, although the underlying fund managers also hold ISA licences.^[3]