Liquidity and efficiency: return to consciousness of provident funds for investment and savings policies - this is how to act correctly | Israel today

In the distant past, the provident funds were also a means of saving for the children and grandchildren.

After a long break, this possibility has become relevant again in two types of financial products - provident funds for investment and savings policies.

It is estimated that the deposits in the provident funds for investment exceeded 10 billion shekels, and in the savings policies - about 5 billion.

What characterizes these products?

An investment provident fund allows a deposit of up to NIS 72,616 per year for each saver.

Depositors aged 60 and over have a tax benefit.

The product can also be deposited in the name of children and grandchildren.

Deposits are liquid

A saver who chooses to withdraw the money after the age of 60 as an annuity will be exempt from tax, but withdrawal of the amount as capital, and not as an annuity, is subject to tax at a rate similar to the savings policy.

When investing in this device, the investment route can be chosen as a result of the level of risk that the investor is willing to take on.

On the websites of the companies that manage the funds, you can follow the development of the investment.

You can switch from route to route and change the level of risk, and such a move is not considered a tax event. The savings policy is a financial savings instrument, in which you can invest a lump sum or monthly deposits.

This product is distributed by insurance agents.

The insurance company charges an administration fee, and some companies allow joining the product through their websites.

When joining, it is appropriate to find out what the management fees will be charged.

In this type of policies, there are several investment routes, which differ from each other in the degree of exposure to various financial assets.

The customer can be of any age and move from track to track in the same company at no cost and without any tax event.

Investment and distribution policies are published for each track, and the liquidity of the policy is full at any age.

Capital gains tax will be charged only when the policy funds are withdrawn, both in the annuity route and in a one-time amount.

As part of the financial preparation for retirement, and as a savings alternative for children and grandchildren, examining the alternatives of these products can be an option, while examining and assisting professionals to check the aspects of taxation, liquidity and internal composition, and making a decision according to personal needs and preferences.

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