Provident Investment Fund

The Provident Investment Fund (Kuppat Gemel Le’Hashkaa) is a modern savings vehicle introduced by Israel’s Ministry of Finance in 2016 to encourage long-term savings through flexible and tax-efficient investment options. It allows for regular monthly contributions, one-time deposits, or a combination of both.

Because the fund offers full liquidity, flexible contribution terms and a variety of investment portfolios, it is suitable for a wide range of goals and time horizons. Whether you are planning for retirement or saving for your children’s future, a Provident Investment Fund is a smart, adaptable and tax-advantaged way to grow your wealth.

Parents can open dedicated funds for their children and use the accumulated savings for academic tuition, purchasing a home, wedding expenses, or any other future need. Alternatively, savers can keep the funds until retirement age to increase their pension income and benefit from significant tax exemptions.

Each individual can contribute up to 70,000 ILS per calendar year. Those over the age of 60 who choose to withdraw their funds as a monthly pension enjoy a full tax exemption on the withdrawal. Withdrawals made before that age are subject to capital gains tax, similar to other investment vehicles such as mutual funds or savings policies.

The funds are invested across a variety of portfolios in the capital markets, providing a valuable opportunity to maximize returns, especially in today’s low-interest-rate environment.

Key Advantages

• Liquidity - You can withdraw your savings at any time for any purpose. Withdrawals are transferred within four business days and are only subject to capital gains tax.

• Flexible Contributions - There is no minimum deposit requirement and the annual contribution limit is 70,000 ILS. Families can open multiple funds - one per family member - to maximize overall returns.

• Financial Security - With full liquidity and accessibility, your savings serve as a reliable financial safety net whenever needed.

• Personalized Management - Contributions can be adjusted at any time. You can make regular monthly deposits, pause or resume contributions, or make additional one-time deposits from bonuses or windfalls.

• Diverse Investment Portfolios - Choose from a variety of investment tracks based on your financial goals, risk preferences and time horizon. You can also switch between tracks or management companies at any time without penalties or tax implications.

• Tax Benefits - The fund provides two major tax advantages:
  1.Deferred taxation, meaning you pay capital gains tax only upon withdrawal - allowing your money to grow through compounding.
  2.Full tax exemption for withdrawals made as a pension after the age of 60.

• Low Management Fees - Provident Investment Funds typically offer attractive management fees compared to other investment options. Over time, this can significantly impact your accumulated savings and long-term returns.