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Changes in the Israeli pension system

July 3, 2023 147 Time to read: 2 min.

The Ministry of Finance presented a budget plan for 2 years. The Israeli taxation system will undergo some changes that will affect retired citizens. We tell you what will happen to the tax on pension savings and the tax benefit on pensions.

Change in tax on pension savings

On February 22, the Israeli Ministry of Finance published the final version of the draft budget for 2023-2024.

One of the proposals of the Ministry of Finance was to change the amount exempt from income tax when withdrawing funds from pension savings. So, for men, this limit will be 14,000 shekels, and for women – 15,000 shekels.

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    In other words, if a man wants to withdraw 14,000 shekels from his pension savings, he will not pay income tax. The Ministry of Finance proposed lowering this threshold to 10,000 shekels for men and 11,000 for women.

    Cancellation of the retirement tax credit

    Earlier, by 2025, it was planned to increase the limit of the tax-exempt pension from 4,742 shekels to 6,110 shekels. But on February 27, it became known that this would not happen. The cancellation of the increase in the amount of tax-free pension was explained by the fact that this decision will affect only people with high wages.

    “If we take into account benefits from the National Insurance Service (Bituah Leumi), for which tax is also not charged, then the average total income of a pensioner will be about 14,000 shekels,” the financial department said.

    Thus, the Ministry of Finance concluded that an increase in pension benefits satisfies the interests of citizens with high pensions, for example, budget ones.

    After lengthy disputes and debates, a budget of 484 billion shekels was approved for 2023. In 2024, it is planned to increase it to 513 billion shekels. Then the program will go to the Knesset for approval in the first reading. Provided that this happens, the relevant commissions will be involved in finalizing the bill.

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