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Saving Plus - an Investment Provident Fund

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Saving Plus - an Investment Provident Fund

Since 2008, the traditional provident funds have become a long-term savings vehicle, the money from which can only be withdrawn as an annuity after retirement age. Lately, the Ministry of Finance approved a new attractive savings vehicle: a new type of provident fund - an investment provident fund that will enable savers to enjoy the benefits of a regular provident fund, but with an added advantage - the possibility of withdrawing some or all of the money accrued in the new provident fund as capital at any given time (even before they have reached retirement age), without paying an early withdrawal “penalty", as is the case with the traditional provident funds, but rather paying tax on profits alone. Alternatively, the funds may also be withdrawn as a tax-exempt monthly annuity after age 60.

 

 

Anyone may start an investment provident fund at any age, with any amount (currently, the minimum monthly deposit is NIS 100), and can deposit it on an ongoing basis or as a lump sum (the deposit can be made by a standing order, bank transfer or check). The maximum amount one may deposit to any investment provident fund is NIS 76,449.63 per year. The funds will be managed by investment house Altshuler Shaham, which manages Savings Plus - investment provident funds, offering a wide range of investment tracks - share-biased, bond-biased, or a combination of shares and bonds, according to the inclinations and needs of each customer. Customers may switch from one track to another at any time, without paying any tax.

 

When can I withdraw money from the new fund?

Withdrawing money as capital from Savings Plus - investment provident fund is possible at any given time, either partially or as a lump sum even before retirement age. When withdrawing the money as capital, you will pay a 25% tax on the profits, as is the case in other investment vehicles. Should you decide to withdraw the funds as annuity after age 60, you will enjoy a full tax exemption.

 

Who is this for?

An investment provident fund is an attractive savings vehicle for short- to mid-term investors whose money is “sitting in the bank”, as well as for long-term savers looking to boost their future pension annuity. If you are saving for the short to medium term, you may deposit funds in an investment provident fund, enjoy having your money managed by professionals and potentially earn returns on your investment, while having the possibility of withdrawing all the funds accumulated without paying an early withdrawal “penalty". When withdrawing the money, you will pay a 25% tax on the profits, as is the case in other investment vehicles. So an investment provident fund is a great savings vehicle for the short, medium or long term for you and a savings tool for your children.

 

If you are saving for the long term (retirement): You can deposit money in an investment provident fund, enjoy the benefits of a regular provident fund, and when you are over 60, you can withdraw the funds as an annuity and receive a full exemption from capital gains tax andincome tax.

 

What are the advantages of saving money through this new type of provident fund?

  • Anyone may start a Savings Plus fund - at any age, with any amount (currently, the minimum monthly deposit is NIS 100), and can deposit in it and in other provident funds up to a maximum of NIS 76,449.63 per year. The saver decides how often to make the deposits - either on an ongoing basis or as a lump sum.
  • Continuous liquidity of the accumulated money: You can withdraw your money at any time, even before retirement age, without paying an early withdrawal "penalty”, paying tax on profits only. This option is not available in the regular provident funds.
  • Tax exempt annuity: Should you decide to withdraw your money as an annuity, you will be tax-exempt. This is possible only after the age of 60. Continuous investment and tax deferral: You can switch from one investment track to another, while maintaining your investment continuity. In other words, as long as the money remains in the fund, you will not be charged tax for the profit accrued from the sale of securities, for receiving a dividend or interest on a bond. Tax deferral means paying less tax, a significant advantage. 
  • Transparency and accessibility: You can monitor the performance of your Savings Plus fund at any time by accessing your personal area on the Altshuler Shaham website. You can also compare the performance of various funds on the Ministry of Finance’s provident fund website.
  • A wide range of tracks and investment channels: You can choose from a wide range of investment tracks to match your inclinations and needs. The product also allows you to invest in non-tradable assets, which is not offered by competing products, and is especially important during periods of low yields on bonds.

 

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Legal Note:

• The foregoing does not constitute a substitute for personal pension advice and/or marketing and/or tax advice adapted to each customer’s needs. • The foregoing is subject to the provisions of the law, the provisions of the relevant articles of association and company guidance. • The foregoing does not exhaust and/or replace the provisions of the Provident Funds Law and/or of the Income Tax Ordinance and/or the provisions of any law. • The foregoing does not constitute a commitment to achieve excess yields or to indicate future yields or ratings. • The Company may subsequently alter the nature of the investment policy and/or the composition of assets, as shall be decided from time to time, subject to the fund’s articles of association and the legislative provisions.  * The maximum deposit amount will be updated annually according to the Consumer Price Index.