The Mandatory Pension Law for Self-Employed Individuals requires self-employed individuals to contribute to a pension but in return provides them with tax deduction and credit benefits through National Insurance and Income Tax. Self-employed individuals can join one of the select pension funds that offer low management fees, including the fund managed by Meitav, which offers 0.22% of the accumulated balance and 1% of monthly deposits, compared to maximum management fees of 0.5% of the accumulated balance and 6% of deposits.

Deposits to a pension fund for self-employed individuals should be made monthly or once per quarter.

The tax benefits are divided into two types: tax deduction benefits and tax credit benefits.

• Tax Deduction: A reduction in taxable personal income. This benefit, which varies from person to person depending on their applicable tax bracket, reduces the amount of income subject to tax, thereby also reducing income tax and National Insurance payments. 
• Tax Credit: A cash refund deducted from the amount payable to the Income Tax Authority. The amount you owe in income tax will be reduced by 35% of the amount you deposited into the pension fund.

The mandatory deposit requirement applies to all self-employed individuals in the country, regardless of their income level, except in the following cases:

• Self-employed individuals under the age of 21.
• Self-employed individuals over the age of 60, the early retirement age.
• New self-employed individuals – those who have been self-employed for less than six months before the end of the relevant tax year.

If you do not fall into one of these three groups and are not yet contributing to a pension, now is the time to start to avoid penalties and secure your future after retirement.

The deposit ceiling for a self-employed individual’s pension fund, for those who do not benefit from a tax-deductible expense due to purchasing disability insurance, is 16.5% of the annual ceiling, as specified on the tax benefits page (click here to visit).

Even in cases where income is not consistent, it is recommended to make monthly deposits. This can be done with a relatively low estimated amount determined in advance, with the deposit completed at the end of the year. As a self-employed individual, it is advisable to consult with your accountant on this matter.

If contributions are made to a pension fund on behalf of the salaried employee, these contributions can be deducted or offset from the contributions the individual is required to make as a self-employed person. In many cases, it is possible that the salaried employee will not need to make additional contributions as a self-employed individual.

Although there is no obligation to contribute above the average wage in the economy, it is advised to make full contributions and insure the entire income amount to assure appropriate insurance coverage that matches the income level, and to maintain a suitable "replacement ratio." The "replacement ratio" refers to the proportion of the monthly income during the working years to the monthly pension received upon retirement. In addition, the old-age pension is calculated in direct proportion to the accumulated savings; therefore, the larger the savings, the greater the expected pension will be.

Yes. Self-employed individuals who are over 50 at the start of the year and contribute to a pension fund are entitled to an “enhanced deduction” benefit. This benefit, at 50%, allows for an even greater reduction in taxable income, subject to a ceiling.

The mandatory contribution requirement is divided into two parts:

• Income up to half the average wage in the economy: 4.45% to a pension.
• Income above half the average wage in the economy up to the average wage: 12.55% to a pension. The average wage in the economy, determined annually by the National Insurance Institute, was ILS 13,769 per month as of 2026.

A self-employed individual who deposits funds up to the full ceiling for a pension fund or provident fund will receive a tax benefit worth ILS 13,443, assuming a marginal tax rate of 35%, or ILS 16,516, assuming a marginal tax rate of 47% (as of 2026). Sounds worthwhile? Indeed, it is.