More Israelis Choose Equity Pension Tracks Amid Economic Shifts, Experts Advise Informed Decisions

As Israel faces record-high interest rates and persistent inflation eroding savings, more pension savers are actively shifting their investments toward equity-based pension tracks. Financial advisor and podcast host Tomer Veron highlights this trend in a new series aimed at simplifying complex financial topics and offering practical money management advice.

Veron recounts a conversation with an investment manager who surprisingly chose a pension track for those under 50 rather than a fully equity-based one, illustrating the importance of conscious investment choices rather than automatic defaults. The current regulatory model, inspired by Chile's approach, automatically adjusts pension risk levels according to age, with younger savers exposed to higher equity risk for greater long-term returns, and risk decreasing as retirement nears.

Since the COVID-19 pandemic, assets in classic equity pension tracks have surged more than tenfold, now representing about 10% of total pension funds, excluding other equity index tracks like S&P 500. For savers in their 30s and 40s, increasing equity exposure aligns with their long investment horizon. However, Veron cautions that switching tracks based solely on recent performance can be risky without understanding the volatility involved.

Data from Pension Net as of May 2026 shows that equity tracks in comprehensive pension funds hold about 71% equities on average, while the under-50 track holds around 57%, due to guaranteed return components limiting free market investments. Over the past decade, equity tracks yielded an average annual return of 11.5% compared to 10.2% for the under-50 track, a 1.3 percentage point difference that can translate into hundreds of thousands of shekels over time.

However, equity tracks also experience higher volatility, with standard deviation measures indicating greater fluctuations. For example, in 2022, equity tracks fell 8.7% on average versus 5.8% for the under-50 track. The under-50 track often includes more alternative and illiquid assets like private equity and real estate, which may reduce measured volatility but carry different risks.

Veron emphasizes the need for savers to assess their risk tolerance and investment horizon carefully before switching tracks. He advises young savers comfortable with market dips to consider equity tracks, while others may prefer the diversified risk profile of age-based tracks. Ultimately, informed and conscious choices tailored to individual circumstances are crucial for effective pension planning.