Israelis pile into stock-heavy pension funds as market rally fuels risk appetite

The Israeli public’s appetite for risk, which in recent years has driven investors into the stock market, is no longer stopping at private trading accounts or mutual funds. It is now reaching the heart of long-term savings: pensions. More and more savers are choosing to increase their exposure to stocks, even at the cost of greater volatility in their most important savings.

Pension savings are the largest and most important financial savings for Israeli citizens. In Israel, salaried employees are required by law to contribute 18.5% each month and are expected to retire at 67 — a retirement age that may rise in the coming years as the state seeks to cope with rising life expectancy, which increases the number of years retirees receive benefits from pension funds and weighs on their balance sheets.

Natural population growth, high mandatory contribution rates, the almost constant rise in wages and low unemployment have all increased the assets managed by pension funds in recent years. As of the end of March, the new pension funds managed about 1.1 trillion shekels. In the current reality, Israel’s pension industry is growing at an exceptional pace of about 20 billion shekels a month, bringing current assets to double the amount managed at the end of 2020. At the same time, the average Israeli’s recent fondness for stocks has apparently reached the pension industry in a big way.

The rally in the local stock market is also driving tectonic shifts in Israel’s pension sector. A Calcalist review of pension data reported monthly to the public shows that over the past 12 months — from April 2025 to March 2026 — pension savers funneled about 35 billion shekels into equity tracks. This is an all-time high for the category. By comparison, in 2023, less than 1 billion shekels flowed into this track, and in 2024, slightly more than 1 billion shekels, while the track managed assets of about 30 billion shekels and 41 billion shekels, respectively.

As a result, the equity track is turning from what was until recently considered a completely niche track into one of the sector’s main tracks — and the third largest in assets under management. It could become the second largest this year. Today, the general track for savers up to age 50 manages 243 billion shekels and is the largest track; the age 50-60 track manages 106 billion shekels; and the equity track manages 96 billion shekels. The flow of savers’ money into the local stock market is providing additional fuel for the Tel Aviv Stock Exchange rally. The TA-125 Index ended 2025 with a return of more than 50%, and over the past 12 months, the exchange’s benchmark index has returned 68.6%.

The flow into equity tracks likely stems, at least in part and perhaps mainly, from money being shifted out of general tracks, which serve as the default option. These are the tracks to which savers are assigned when joining a pension plan if they do not state a preference. In Israel, a saver with no stated preference is automatically assigned, usually through an insurance agent, to an age-based track under the Chilean model, which is determined by age in an effort to match the risk profile. Thus, an employee under 50 is assigned to the up-to-50 track, which combines investments in stocks, bonds, alternative investments and cash. Savers over 50 are assigned to the 50-60 age track, which focuses more on bonds as part of a more conservative approach. These age-based tracks were established in 2016-2017 and became the default in 2018.

However, over the past 12 months, about 25 billion shekels have left the default tracks. In other words, within one year, one in 10 savers left the track in financial terms. Given that the funds continue to grow as a result of ongoing contributions by existing savers, the actual departure rate is likely even higher.

A review of the next age bracket, 50-60, shows that those tracks are still recording net inflows. In other words, the stock mania has not yet taken hold across all age groups, and there may be further potential for the trend to continue.

It is important to note that equity tracks in the pension industry are not 100% exposed to stocks, in order to moderate sharp volatility in the value of pension savings. In practice, exposure to stocks stands at about 70% — double the level common in general tracks. In addition, the tracks are geographically diversified: about 70% of exposure is to the local market and about 30% to overseas markets.

Pension funds’ equity tracks ended 2025 with returns ranging from 21.8% at Menora Mivtachim to 17.5% at Altshuler Shaham. By comparison, the up-to-50 track generated returns ranging from 19% at Menora Mivtachim to 15.5% at Altshuler Shaham. The gap between the tracks in 2025 appears relatively minor — about 3% on average — but over the long term, the picture is different: Over the past five years, the up-to-50 track produced an average cumulative return of 57.6%, compared with 73.3% in the equity track, a gap of just under 16 percentage points.

A senior executive at a large institutional body told Calcalist: “The field is on fire. People have stopped looking at bonds or any other investment vehicle. Savers recorded huge returns in 2025 in the equity tracks. People who made money are not interested in single-digit returns. We are seeing a rush into equity tracks, with a focus on Israeli tracks.”

The equity tracks offered by pension managers are broad tracks that do not focus on a specific index, unlike tracks that follow the flagship U.S. S&P 500 Index, which were the hit of 2023-2024. In 2025, tracks following the U.S. index ended with a dollar return of only about 4% — meaning a real shekel return that was zero, and even negative after management fees. The low return was mainly due to the dollar weakening by about 12% against the shekel during the year, despite the index itself rising by about 16%.

Over the past 12 months, Israelis’ attitude toward pension tracks following the S&P 500 has reversed, with those tracks recording net negative transfers of 2.3 billion shekels during the period, bringing assets under management in the track down to 110.6 billion shekels. In the first months of 2025, money was still flowing into these tracks, but beginning in October, a clear trend reversal emerged, and assets have since declined. In the past six months alone, about 9.8 billion shekels flowed out.

“In recent days, we have been dealing with customers leaving S&P 500 tracks, which disappointed investors last year with a minor and even loss-making return,” said a senior executive at another institutional body. “We continue to argue that savers find it very difficult to stick with a particular track. The moment they see losses, they ask to change positions. I hope this time the rush into pension equity tracks does not end like the rush into S&P 500 tracks.”