Israel (IL)
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Retirement & Pension in Israel
State pension, contribution refunds, private pension vehicles, and international agreements.
Israel has a three-pillar pension system: (1) State pension through the National Insurance Institute (Bituah Leumi), providing a basic guaranteed income; (2) Mandatory occupational pension savings (Kranot Pensiya), compulsory since 2008 for all employees under the Pension Comprehensive Law — employer contributes 6.5% (pension savings) plus 6% (severance component) and employee contributes 6% of gross salary; (3) Voluntary individual savings through provident funds (Kupot Gemel) and study funds (Krangot Hishtalmut). The mandatory pension reform ensures most Israeli workers accumulate significant retirement savings. Olim who arrive mid-career may face a gap in their pension savings history — this requires proactive planning.
State Pension
The National Insurance Institute (Bituah Leumi) pays an old-age pension (Kitzva Z'kna) to all Israeli residents who have reached retirement age and accumulated the minimum contribution period. The pension is relatively modest — designed as a safety net, not a full replacement income. It is funded on a pay-as-you-go basis from current National Insurance contributions.
Men: 67. Women: currently 65, rising gradually to 67 by 2032. Early retirement option for women at 62 with reduced pension. Full pension (without income limits): men at 70; women at 67.
Minimum 60 quarters (15 years) of contributions for full pension. Partial pension available from 12 quarters (3 years). Pension amount scales with contribution years up to 50 years (maximum pension).
Use the Bituah Leumi pension simulator at btl.gov.il/Stimulation. Log in with Teudat Zehut to see your personal contribution history and projected pension. The pension calculator shows the approximate monthly benefit you will receive at retirement age.
Israeli state pension can be paid to Israeli citizens and residents living abroad. Must maintain contact with Bituah Leumi and confirm address annually. Payments can be made to a foreign bank account (SWIFT transfer). Totalization agreements with 20+ countries prevent double contributions and allow combined pension calculation.
Pension Contribution Refund on Leaving Israel
Non-citizen foreign workers (B1 visa holders) who leave Israel permanently and have accumulated mandatory pension contributions. Employees from countries without totalization agreements with Israel may be able to withdraw accumulated pension savings.
Israeli citizens and permanent residents cannot withdraw pension savings before retirement age (with very limited exceptions). Olim who retain Israeli citizenship cannot withdraw pension savings on leaving.
No waiting period after leaving Israel — withdrawal can be requested once employment ends and the person no longer lives in Israel.
Employee contributions accumulated in the pension fund (Keren Pensiya). Employer contributions may or may not be refundable depending on the pension fund rules and length of service. Tax may apply to the refund — consult a tax adviser.
Contact your pension fund (Keren Pensiya) directly. Provide proof of departure from Israel and employment termination. Request pension refund (Mishikat Keren L'Toshav Chozer). The process typically takes 30–90 days.
Pension withdrawal is generally not recommended if you plan to return to Israel or if the accumulated amount is small. Partial withdrawal may be possible. Israeli pension funds (Harel, Migdal, Menorah, Phoenix) all have online portals for account management.
International Totalization Agreements
Israel has bilateral social security totalization agreements with the USA, UK, Germany, France, Canada, Italy, Austria, Belgium, Netherlands, Sweden, Finland, Czech Republic, Romania, South Korea, and several other countries. These agreements: (1) Prevent double social security contributions on the same income; (2) Allow contribution periods in both countries to be combined (totalized) for pension eligibility; (3) Allow pension payments to be exported to either country. This is particularly important for Olim who worked in these countries before Aliyah — those years may count towards Israeli pension eligibility.
Private Pension Vehicles
Mandatory Pension Fund (Keren Pensiya)
קרן פנסיהAll employees in Israel — mandatory by law since 2008
No direct subsidy but contributions are tax-deductible
Employee contributions: 35% income tax credit on qualifying contributions under Sections 45A and 47 of the Income Tax Ordinance. Employer contributions: tax-deductible for employer. Pension income in retirement partially exempt.
Mandatory minimum: employee 6%, employer 6.5% (pension savings) + 6% (severance). Voluntary additional employee contributions possible. Self-employed: up to 16% of income with enhanced tax benefits.
Fully portable between employers and pension funds within Israel. Can be transferred to Kupot Gemel (provident funds) in some circumstances.
Each employee must be enrolled in a pension fund (Keren Pensiya) within 3 months of employment. Main providers: Harel, Migdal Makefet, Menorah Mivtachim, Clal, Phoenix (Halman-Aldubi), Altshuler Shaham. Compare fund performance and management fees (Dmei Nihul) — fees vary significantly and compound dramatically over decades.
Study Fund (Keren Hishtalmut)
קרן השתלמותEmployees (employer must offer it); self-employed (highly recommended). A uniquely Israeli tax-advantaged vehicle.
No direct subsidy but contributions are TAX-FREE (most powerful tax benefit in Israel)
Employer contributions: tax-free up to 7.5% of salary (extraordinary benefit). Employee contributions: not tax-free. Withdrawals after 6 years: completely tax-free. If withdrawn before 6 years for study purposes only — also tax-free.
Tax-exempt ceiling (2026): ~NIS 16,620/year employer contribution; NIS 6,648/year employee (combined up to NIS 23,268/year tax-free).
Fully portable. Many consider this their most valuable financial benefit — never leave an employer without ensuring your Keren Hishtalmut is properly set up.
The Keren Hishtalmut is THE most valuable financial benefit available to Israeli employees — the employer's 7.5% contribution is completely tax-free, making it an extraordinary wealth-building tool. Always negotiate for Keren Hishtalmut when accepting any Israeli job offer.
Provident Fund (Kupa Gemel)
קופת גמלSelf-employed and high earners wanting to save beyond the mandatory pension. Also used as severance (Pitzuim) savings.
No direct subsidy
Contributions deductible from taxable income (self-employed: up to 16% of income). Growth is tax-deferred. Withdrawals at retirement as pension: fully exempt. Withdrawals before 60: taxed.
Varies by income level. Self-employed: up to 16% of income eligible for deduction. For employed: supplementary above mandatory pension.
Fully portable and flexible compared to some traditional pension products.
More flexible than traditional pension funds. Available as either annuity or lump-sum at retirement. Can be used for both pension and lump-sum withdrawal at age 60+ (after 15 years from first contribution).
Early Retirement Options
Standard retirement age in Israel is 67 (men) and 65–67 (women). Early retirement from Keren Pensiya is generally not permitted before age 60. Exception: long-term disability pension (Kitzva Nechut Klali) may provide early access. Voluntary early retirement arrangements: some collective agreements (Heskim Kabatziyim) provide for early retirement pensions from age 60 onwards in specific sectors (public sector, banks, military). Self-employed and those with Kupa Gemel have slightly more flexibility from age 60.
Pension Gap Warning
Non-citizen expats on B1 visas who leave Israel before completing 15 years of contributions may have gaps in both Israeli and home-country pension systems — creating a potentially significant retirement income gap. Olim who arrive in Israel at ages 40–55 may not accumulate sufficient Israeli pension years for a full state pension. Both groups should: (1) maximise voluntary savings through Keren Hishtalmut and Kupa Gemel; (2) check totalization agreement status for their home country; (3) consider private pension insurance (Bituach Hachnasa) that pays a guaranteed monthly income from a specified age; (4) consult with an Israeli pension specialist (Yoetz Pensiya) early in their career in Israel.
Useful Links
Retirement & Pension
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