- July 25, 2026
- 6:28 pm
- Israel
After dismissal, many salaried employees in Israel perceive pitzuyim as a regular cash payment: the job is over, an available amount has appeared — it means it can be transferred to a bank account and used for repairs, debts, helping children, or everyday expenses. Legally, a person can indeed gain the right to dispose of this money, however, the financial consequences of such a decision often manifest only many years later.
Journalist NAnews Elena Gunko discussed this topic with insurance specialist Idan from the insurance agency ZASHITA. The expert explanations in the material are presented in a generalized form based on the conversation, rather than as a verbatim transcript of the interview.
Author page of Elena Gunko: https://nikk.agency/author/elena-gunko/
The agency ZASHITA is headed by Yarik Morgan — an expert in comprehensive family financial protection in Israel, with over 16 years of practical experience working with pension, insurance, and savings programs. The agency’s office is located at: Rishon LeZion, Ha-Rishonim Boulevard, 23, Building B, 11th floor.
Therefore, the most sensible first step is not to guess, but to check.
Read more about retirement in Israel, pension funds, Bituach Leumi, pitzuyim, and important checks before making a decision here: https://pension.nikk.co.il/
Why pitzuyim is not just money after dismissal
Pitzuyim, or compensation component, accumulate for many salaried employees within pension insurance along with regular pension contributions. Since 2008, employers are required to monthly transfer part of the compensation component to the employee’s pension program, and under certain conditions and agreements, the entire stipulated amount can be directed there.
Idan draws attention to a common psychological mistake: a person sees a separate line with pitzuyim and perceives it as free capital, not connected to future pensions. In practice, this money can constitute a significant part of the savings from which the monthly pension payment will later be calculated.
Why do people still decide to withdraw pitzuyim? Usually, the reason is not carelessness, but a quite understandable life situation. After losing a job, a family may need a financial cushion, money for a mortgage, medical expenses, or a period of searching for a new place, so the advice “never withdraw anything” cannot be considered universal.
The problem begins when the decision is made without comparing two scenarios. In the first, a person receives a large sum now, and in the second, leaves it in the pension program, where the money continues to participate in forming the future pension.
One decision immediately affects several parts of the pension picture
Based on the conversation, Idan highlighted 4 questions that need to be considered simultaneously:
- the size of available pitzuyim,
- future monthly pension,
- tax consequences and
- the financial situation of the family today.
Answering only one of them does not show the real cost of the decision.
For example, a large sum in the account by itself says nothing about how much the monthly payment will decrease after retirement. For a person, it is important not only the amount that can be received today but also how much money he will not receive monthly over the following years.
Official explanations for workers directly warn that the decision to withdraw pitzuyim or leave them in the pension program affects both the size of the future pension and taxation. The Ministry of Finance recommends not withdrawing the compensation component without prior verification, so as not to reduce the pension payment.
How much can be lost and why taxes cannot be considered separately
The most painful question is — how much can the withdrawal of pitzuyim reduce the future pension. There is no single figure for everyone: the result depends on the size of the savings, age, duration of further work, fund structure, and the conditions of the specific pension program.
At the same time, warnings from Israeli reference resources are quite serious: withdrawing compensation funds from pension insurance can in some situations reduce the future monthly pension by more than a third. Moreover, using tax exemption when receiving pitzuyim can reduce the tax benefits available to a person when arranging a pension in the future.
Idan emphasizes that this is where people often compare incomparable figures. They see, for example, tens or hundreds of thousands of shekels that can be received today, but do not translate the future loss into an amount over ten, fifteen, or twenty years of pension life.
If the monthly pension decreases even by a few hundred or thousand shekels, the accumulated difference over time can exceed the amount that a person once withdrew. But there is also the opposite situation: the family really needs money now, and keeping the entire amount within the fund is not a realistic option. Therefore, expert calculation should not prohibit the action but show its cost.
Form 161 — not a technical paper for the employer
After termination of employment, the employer is obliged to inform the Tax Authority about the termination of employment relations and indicate the amounts and rights granted to the employee. In the current procedure, the new form 161 also allows the employee to choose what to do with the compensation funds located in the relevant programs.
According to Idan, it is a mistake to treat form 161 as a document that needs to be quickly signed to get money. The choice can affect immediate withdrawal, retention of funds for future pensions, tax regime, and further rights arrangement.
A separate tax issue arises already upon retirement. Form 161d is used to secure tax rights and determine the order of exemption from tax on pension payments or their capitalization; previous use of tax benefits on pitzuyim can affect the available exemption at this moment.
That is why a pension specialist does not replace a tax consultant where an individual tax solution is required. A proper check should timely show that a tax specialist needs to be involved in the matter, rather than giving a person the false impression that one document solves everything.
What to check before withdrawing pitzuyim
NAnews — Israel News | Nikk.Agency considers this topic as part of a broader problem: many Russian-speaking workers receive tlosh maskoret and pension reports for years, but only study them in detail after dismissal. At this moment, the decision has to be made quickly, although the consequences will affect the family income significantly longer than the period without work lasted.
Based on the conversation, Idan recommends first gathering information about all pension programs. It is necessary to find out where the pitzuyim are located, whether the employer transferred the full compensation component, whether the conditions of section 14 apply, whether there are old funds, and what the pension forecast will look like with and without withdrawing money.
The next step is to compare not two abstract sums, but two life scenarios. How much money does the family need today, can the need be covered in another way, how much will the future pension decrease, will a tax arise, and what will happen to tax benefits upon retirement?
It is also useful to check the employer’s documents. If the transfers were not made in full, the calculation of pitzuyim does not correspond to the salary, or the money is not in the program expected by the employee, it is necessary to deal with the discrepancy first, and only then decide on withdrawal.
Therefore, the most sensible first step is not to guess, but to check.
Read more about retirement in Israel, pension funds, Bituach Leumi, pitzuyim, and important checks before making a decision here: https://pension.nikk.co.il/
Why after 60 years the cost of error increases
Particularly careful attention to pitzuyim should be paid by people who have already reached 60 years, continue to work, or are preparing for retirement. At this age, there is less time left to restore withdrawn savings, and decisions on compensations begin to directly intersect with the start of pension payments, taxes, and conditions for the spouse.
At the same time, the age of 60+ does not mean that a person is obliged to immediately retire or start receiving a pension. In some cases, it is possible to continue working and simultaneously consider payments from the pension fund, but the decision requires an individual calculation of the entire financial picture.
We have analyzed this possibility in a separate material:
You are 60+ in Israel and continue to work? Perhaps the pension fund can already pay you money – https://nikk.agency/vam-60-v-izraile/.
For a working person over 60, the question may no longer sound simply as “whether to withdraw pitzuyim”. It is necessary to compare salary, further contributions, possible pension payment, tax burden, and the size of future family income.
When withdrawal of pitzuyim can still be justified
Idan does not suggest considering any withdrawal as wrong. Life circumstances vary, and sometimes access to money is indeed necessary: in case of prolonged unemployment, heavy family expenses, lack of another financial reserve, or the need to solve a critical problem.
However, even in such a situation, it is possible to check not only two extreme options — withdraw everything or withdraw nothing. Depending on the program, documents, and tax circumstances, a specialist can help assess partial use of funds or another sequence of actions, but a specific decision is permissible only after studying personal data.
The main conclusion of the conversation is simple: the right to receive money and the financial benefit from receiving it are not the same. Pitzuyim belong to the employee, but the way and timing of their disposal can change his income for many years.
Therefore, the most sensible first step is not to guess, but to check.
Read more about retirement in Israel, pension funds, Bituach Leumi, pitzuyim, and important checks before making a decision here: https://pension.nikk.co.il/
We have analyzed this possibility in a separate material:
You are 60+ in Israel and continue to work? Perhaps the pension fund can already pay you money – https://nikk.agency/vam-60-v-izraile/.
The material is informational in nature and does not replace individual pension, tax, or legal consultation. The decision to withdraw pitzuyim should be made after checking documents, pension program conditions, tax status, and the financial needs of the family.
