Everyone who works in Israel - whether self-employed or a salaried employee - is required to have a pension plan or an Insurance Fund (otherwise known as Bituach Menhalim)
If you are a salaried employee, your employer is required to open one for you after six months of employment. If you have an existing fund and change jobs, you can negotiate with your new employer to take over his portion of the payments into the fund immediately.
Pension plans
Pension plans combine the aspects of life insurance, disability insurance, and retirement income into one package.
A pension plan is not an insurance policy, which is a clearly defined contract between you and the insurance company. Rather, it is a fund made up of thousands of members who all share in the fund’s profits and liabilities, and whose terms and conditions are subject to change.
Death benefits are paid out monthly to a spouse and children under 18, but the size of the benefit depends on how long you have been paying into the plan. Therefore, if you are relying on your pension plan to take care of your family, it is advisable to add additional ife insurance coverage until the size of the death benefit rises.
While the amount of your monthly retirement benefit depends on how much and for how long you have been paying into the fund, its level is not guaranteed, but rather is determined at retirement based on your age, gender, the amount that you have accrued, and the financial state of the fund itself.
Bituach Minhalim
Bituach Minhalim is like a pension fund with the following major differences:
- The three separate elements of life insurance, disability insurance, and savings for retirement are not rolled into one package, rather they are all purchased separately.
- It is an individual contract between you and the insurance company, whose terms and conditions are not subject to change. It therefore provides an element of stability that a pension fund does not.
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