Israel Salary Sacrifice (Vikur) Pension Calculator 2025
Calculate the income tax saving from voluntary pension contributions beyond the mandatory 6% in Israel 2025. Enter your salary and extra contribution percentage to see your net cost and tax benefit.
Enter your gross monthly salary and your voluntary extra contribution percentage to see the income tax saving and net cost of increasing your pension contributions.
Annual income tax saving
--
Extra monthly contribution
--
Tax saving per year
--
Net cost after tax saving
--
Pension pot boost over 20 years
--
Your breakdown
Updates live as you type
Item
Amount
How voluntary pension contributions reduce your Israeli income tax
Israeli law allows employees to contribute more than the mandatory 6% to their pension fund and claim an income tax deduction on those extra contributions. Because Israel uses progressive marginal rates, the saving is highest for employees in the upper brackets. For example, an employee on 15,000 ILS per month in the 31% bracket who adds an extra 3% (450 ILS per month) saves roughly 1,674 ILS per year in income tax, making the real cost of the contribution only about 3,726 ILS per year rather than 5,400 ILS.
Limits and ceilings on the deduction
The tax deduction for employee pension contributions is capped at a percentage of salary, and that salary itself is subject to a ceiling updated each year by the National Insurance Institute. Contributions above the cap receive no additional deduction but are still deposited into the pension fund tax-free until withdrawal. The 20-year projection in this calculator assumes a 5% annual nominal return on the additional contributions compounded monthly, which is illustrative only and not a guaranteed outcome.
What this calculator does not cover
This tool does not model the employer matching component, Bituach Leumi interactions, or the tax treatment at withdrawal (see the pension fund tax calculator for withdrawal rules). It also does not account for tax credit points (nikkui) that may further reduce your tax bill. For a precise optimisation of your pension structure, consult a licensed Israeli financial planner (yoetz pensia) or tax adviser.
Frequently asked questions
What is salary sacrifice (vikur) for pension in Israel?
In Israel, employees and employers must both contribute to a pension fund (keren pensia). The mandatory employee contribution is 6% of salary and the employer contributes 6.5% to 7.5%. Vikur refers to voluntary additional contributions beyond the mandatory minimum. These extra contributions are deductible for income tax purposes up to a ceiling set by the Income Tax Ordinance, making them an effective way to reduce your current-year tax bill while boosting retirement savings.
How much of voluntary pension contributions are tax-deductible in Israel?
Under Israeli tax law, an employee can deduct voluntary contributions to a recognised pension fund up to 7% of gross salary (combined mandatory and voluntary), subject to a salary ceiling (updated annually). Contributions above the statutory ceiling receive no additional deduction. The deduction reduces the amount of income subject to marginal tax rates, so the actual saving depends on your tax bracket.
What marginal income tax rates apply in Israel in 2025?
Israeli income tax in 2025 uses brackets starting at 10% on the first roughly 81,000 ILS per year, rising through 14%, 20%, 31%, 35%, and 47% on income above approximately 698,000 ILS per year. A surtax of 3% applies to income above around 721,000 ILS. Most salaried employees in the 31 to 35% marginal bracket benefit most from pension contributions.
Does salary sacrifice affect Bituach Leumi (National Insurance) contributions?
Voluntary pension contributions reduce income tax but do not reduce Bituach Leumi (National Insurance Institute) contributions in the same way. Bituach Leumi is assessed on gross earnings up to a separate ceiling. Consult a payroll specialist or tax adviser for the precise interaction, as the NII base uses a different definition of income than the income tax base.