Education Funds In Israel – The Fundamentals.

Education Fund in Israel
Photocredit - Raz Chorev
  1. An Education Fund is a medium-term savings channel for employees 
  2. Some translate it as a Study Fund (In Hebrew – Keren Hishtalmut קרן השתלמות).
  3. In some cases, an employee can withdraw the funds accrued without paying income tax on them and the earnings accrued.
  4. Employees who are savings in education funds can get low interest rate loans and more favourable repayment conditions than banks.

The Education Fund is a savings fund for employees. Originall, it was intended to be used to finance courses such as vocational further studies. Employers and Employees are currently using the Study Fund as a general medium-term savings channel. It is the only non-long-term tax-exempt channel after the tax reform of the Israeli capital market.

The amounts and earnings accrued in the Education fund are exempt from income tax, subject to a number of conditions. The Israeli Government doesn’t impose restrictions on money usage, as accumulated at the end of 6 years term. Therefore, employees can utilise the money for any need and not necessarily for education. This has made education funds a savings (tax-exempt) channel that is often not used for education at all.

Important Notes

  • The law does not require an employer’s contribution to an Education Fund. There are collective agreements and extension orders in various sectors requiring employers to set aside a Study fund.
  • An employee can not open an Education Fund himself, if their employer is not obligated to make contributions to a Study fund, cannot open one himself.
  • An employee who, while working as an employee, is also self-employed can open an Education Fund as an independent employee.
  • Contract Workers (Personnel Companies)
    An employer must set up an Education fund for contract workers, if he provide this benefit for direct employees. This is done 6 months after the period stipulated in the collective agreement for the direct employees.
  • If the contract employee was eligible for Fund contribution from a particular employer and then transferred to another employer who is also obligated to set aside funds for the training of his direct employees, the Contract Management Company will continue to set aside the funds for the employee’s Education Fund, without the need for an additional waiting period. The money will be transferred to the same Fund, but the employee may ask the company, in writing, to transfer to the Fund where the money of the other employees of the employer is kept.


  • The employee will indicate to his employer the details of the fund to which he wants to make the contributions, and fill out the required documents as required by the fund.
  • The employer will deduct the employee’s share of the salary and transfer the payments to the Education Fund every month.
  • The employer must transfer payments to an Education Fund (both the employee’s share and the employer’s share) on the earlier of the following two dates:
    • 7 business days from the date of payment of the monthly salary to the employee;
    • 15 days from the end of the month for which the employer must pay the employee salary.

Transferring the funds from one Education Fund to another

The employer can transfer the funds from one Fund to another (even if another company is currently managing the other study fund) while retaining the employee’s original tenure in the fund.

Withdrawing funds

An employee can ask to withdraw the full amount, or part of the Education Fund. There will be some tax implications, depending on the timing of the withdrawals and the purpose of the use of funds. 

Important to know

The Employee owns the Education fund and the funds are the employee’s property, even if the employee is no longer working for the company which established the fund. 

In an event where funds are no longer deposited into the Education Fund, there are negative implications – the funds continue to accrue interest and employee tenure. 

In case of death of the employee, funds can be drawn immediately. 

source: translated from


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