Provident Funds Outpace Bank Deposits by 50,000 NIS in Child Savings Scheme
A PWC simulation shows provident fund savings for children yield up to 50,000 NIS more than bank deposits. With 98,000 accounts moved in 2025, experts urge complete fund transfer rights.
A new simulation conducted by financial services firm PWC for the Association of Investment Houses reveals that profits from the "Saving for Every Child" program in provident funds could be approximately 50,000 NIS higher than those generated through bank deposits. The data highlights the significant flaw in the Ministry of Finance's decision to allow banks to participate in the program, showing that the choice of where to manage the savings creates dramatic gaps in young Israelis' financial starting points as they enter adulthood.
The "Saving for Every Child" program has been operating since the beginning of 2017 and is intended for every child in Israel under the age of 18. Under the scheme, the National Insurance Institute deposits a monthly sum—currently standing at 58 NIS and linked to the Consumer Price Index—into a dedicated savings account, with parents permitted to match the amount. Although the savings span at least two decades, the program can be opened not only in investment-linked provident funds managed by insurance companies and investment houses, but also in dedicated bank deposits.
Savings participants choosing provident funds can select between three investment tracks: high risk, medium risk, or low risk. Those choosing a bank can select from four deposit tracks: unlinked fixed interest or linked fixed interest, with each offering an option for exit points every 5 years or a locked track holding the funds until age 18.
The PWC examination is divided into two parts. First, it analyzed the actual performance of the various tracks from the program's inception until March 2026, marking its first 9 years. All figures and profits presented in the study refer to the "expanded program," meaning children whose parents chose to double the monthly deposit. To establish a comparison, data was calculated using the average yields achieved by institutional bodies in each risk track against the average interest rates granted by banks across the various deposit tracks.
Savings Gaps Can Climb to 70,000 NIS
These numbers tell an unambiguous story: while the principal deposited so far stands at approximately 11,500 NIS, a child whose funds were managed in a provident fund under the high-risk track has already accumulated a profit of about 8,800 NIS. The medium-risk track yielded a profit of roughly 4,900 NIS. By contrast, the most profitable bank track generated a profit of only about 2,000 NIS during the same period. The weakest bank track recorded a profit of just 500 NIS—a gap exceeding 17-fold compared to the equity track.
In the second stage, PWC conducted a simulation assuming that the yields achieved over the first 9 years—such as an average of 12.4% annually in the high-risk track—will continue at the exact same pace for the next 9 years until age 18. According to the simulation, a child in the high-risk provident fund is projected to reach age 18 with a predicted profit (before tax) of nearly 56,000 NIS, accumulating a total pot of about 81.6,000 NIS. Conversely, a child whose money is locked in a bank deposit is expected to reach a profit ranging between 3,800 NIS in the worst case and 10,100 NIS in the best case, with total savings ranging from 29,000 to 35,000 NIS.
A similar picture emerges when examining later cohorts: a simulation conducted for children who joined the program in February 2019, as well as in 2022 and 2024, displays gaps, in some cases of even greater magnitudes. Furthermore, when the simulation stretches to age 21—the date when funds can be withdrawn alongside a state grant—the power of compound interest ensures that the same child with high-risk savings will enjoy a total savings pot of about 114,000 NIS, compared to 30,000 to 40,000 NIS in banks.
Future simulation figures must, of course, be viewed with great caution. There is no certainty that the relatively high yields of the past 9 years will be maintained, every saver is affected by the timing of withdrawal, and profit potential entails taking risks, such as a stock market crash right before withdrawal. Additionally, other assumptions include a future inflation rate of only 2% (affecting yields in CPI-linked bank tracks). Moreover, the gaps are presented before the deduction of a 25% real capital gains tax imposed upon withdrawal from provident funds (compared to a 15% nominal tax on unlinked deposits), a payment that will narrow the absolute gap in shekels. Nevertheless, even after these caveats, the bottom line is clear: in a long-term investment environment spanning two decades, banks struggle to provide attractive competition.
A Solution for Parents from Weakened Populations
The general public is increasingly internalizing this bottom line, leading to a gradual market shift. At the beginning of 2025, a legal amendment came into effect allowing bank savers to transfer their future deposits to provident funds, while previously accumulated funds remain locked in the bank. According to National Insurance Institute data published last month, approximately 98,000 savings accounts were transferred from banks during 2025 alone. Following this attrition, the share of savings managed by banks dropped to just 16%, currently standing at about 583,000 active savings accounts.
Another significant point is that families from lower socioeconomic backgrounds are more likely to choose bank deposits over managing savings through insurance companies and investment houses, thereby locking in the loss of tens of thousands of shekels at the starting line of their children's adult lives.
In a conversation with Calcalist, Adv. Nimrod Sapir, CEO of the Association of Investment Houses, stated:
«A decade after the launch of the program, we have long-term perspective for the first time, allowing us to assess more soundly how much money is expected to accumulate for children at the end of 18 years of saving. The simulation shows that results could be significantly higher than estimates we knew previously. The past years also clearly illustrate the massive gap created between saving via provident funds and bank deposits.»
Sapir noted that the immense success of the "Saving for Every Child" program is indisputable, and in light of this, he called on the government "to examine its expansion—while providing a solution for parents from weakened populations who currently struggle to double the savings amount for their child. Furthermore, following the successful legislative amendment for diverting funds from bank deposits to provident funds, we call for completing the move in a manner that will also allow the full transfer of deposits remaining in banks, which are currently prohibited from being moved to provident funds."
The Ministry of Finance stated: "The ministry monitors the program and periodically examines its characteristics and the need for adjustments, with the aim of ensuring that the savings optimally serve Israel's children over time."
