From 2027, new rules for private retirement provision will apply in Germany. The retirement account is intended to combine government allowances, investments in funds and ETFs, as well as tax benefits in a single product. The following explains who is eligible for the product, the amount of allowances granted, and which elements of the reform have already been determined, while others still depend on the offerings of banks and financial institutions.
What is the retirement account?
The retirement account is a new model of private pension provision that will apply in Germany from 1 January 2027 and replaces the previous system for newly concluded contracts. The reform has already been adopted by the Bundestag and Bundesrat, so its entry into force is certain and banks, brokers, and insurance companies have time to prepare the corresponding products.
From 2027, no new contracts based on the old Riester rules will be offered; however, contracts concluded prior to that date may continue to be maintained. The change is based on years of criticism of the previous system, particularly due to high costs, a complicated product structure, and the mandatory capital guarantee, which significantly limited investment opportunities in the markets.
This does not constitute an ordinary securities account – state funding is granted only if contributions are made to a product that meets the statutory requirements. The available investment instruments are restricted to certain asset classes, with the specific offering prepared by a bank, insurance company, or other certified provider.
A simple tax return in 12 minutes?
Choose Taxando!
From 2027, three main variants will be available:
- Retirement account without guarantee – independent selection of available funds and ETFs,
- Standard account – a simpler product for individuals not wishing to assemble their own portfolio,
- Guarantee product – with protection of 80% or 100% of the contributions paid at the start of the payout phase.
In the standard account, effective costs, i.e., the average annual reduction in yield due to costs, will be limited to 1%.
The key innovation as of 1 January 2027 is the abolition of the mandatory contribution guarantee. Contributions may thus be invested in funds and ETFs with higher return potential. It should be noted, however, that greater investment opportunities also entail an increased risk of loss in value of the savings.
What is the amount of the state allowance?
The maximum basic allowance is 540 euros per year. The amount depends on one’s own contributions and not on income.
The mechanism functions as follows:
- for the first 360 euros contributed per year, 50 cents per euro contributed are granted, up to a maximum of 180 euros,
- for further contributions up to a total of 1800 euros, 25 cents for every additional euro, up to a maximum of 360 euros, are granted,
- to receive the basic allowance, a contribution of at least 120 euros per year is required,
- the maximum contribution limit to the account is 6840 euros per year, but the allowance relates to a maximum of 1800 euros of own contributions.
Example: 150 euros per month, i.e., 1800 euros annually, are contributed. The state provides 180 euros for the first 360 euros as well as 360 euros for the remaining 1440 euros. This results in a credit of 2340 euros to the account before investment results and product costs are taken into account.
Arbitrary contributions should be avoided. A standing order should be established, and at the end of November it is advisable to review the annual sum in order to make any necessary additional contributions so that the full entitlement to the allowance is maintained and no entitlements are lost due to minor shortfalls. Special attention is warranted in the case of irregular income and child allowance, as funding is based on the actual amounts contributed.
How do the child allowance and the entry-level bonus work?
An allowance of up to 300 euros per year may be granted for each child, with the full amount requiring an own contribution of at least 300 euros. For every euro contributed up to this limit, one euro child allowance is paid.
With an annual contribution of 1800 euros and one child, the total allowance can amount to 840 euros: 540 euros basic allowance and 300 euros child allowance. With two children, funding increases to up to 1140 euros.
A person who has not yet reached the age of 25 at the beginning of the contribution year and meets all other requirements may also receive a one-off entry-level bonus of 200 euros.
Who can use the retirement account?
The primary entitlement to allowances exists for individuals who are subject to the German state pension system; however, the group of eligible persons is being expanded.
The eligible group may include, among others, the following categories:
- Employees and persons in education or training,
- Minijobbers with continuing pension insurance obligation,
- Parents during periods recognized for child-rearing,
- Persons who care for close relatives and meet the statutory requirements,
- Civil servants, judges, and professional soldiers following approval for data transmission,
- Some entrepreneurs and members of the liberal professions,
- Compulsorily insured members of professional pension schemes.
An additional requirement applies to self-employed persons. A person who generates income from commercial operations under Section 15 EStG or from certain liberal professions under Section 18 EStG must file a German tax return.
How does the retirement provision deposit affect taxation?
During the accumulation phase, there is no ongoing taxation of gains and earnings that remain within the contract. Taxation only occurs upon payout of the funds.
Own contributions up to the statutory maximum amount as well as eligible allowances can be claimed as special expenses in the tax return. The tax office then checks whether the deduction yields a greater tax advantage than the allowance itself. If a greater benefit results from this, entitlement to an additional tax advantage arises.
However, a fixed refund should not be expected from the outset. The outcome depends, among other factors, on income, tax rate, family situation, and further information provided in the tax return. The tax return can be prepared independently. The tax app Taxando allows for simplified submission of the return online.
How are savings paid out?
At the start of the payout phase, either a lifelong pension or a payout plan that runs at least until the age of 85 may be selected.
The lifelong pension ensures a monthly payment until the end of life. A payout plan offers greater control over the pace of capital withdrawal, but following its conclusion, no further payments are made. Funds not paid out from the payout plan may be inherited. The classic lifelong pension generally ends with death, unless the contract stipulates a guaranteed payout duration.
At the start of the pension phase, a one-time payout of up to 30 % of the accumulated capital can be made without loss of the subsidy. Payouts from subsidised contributions are taxed at the applicable income tax rate during this period.
Is early payout from the retirement provision deposit possible?
Regular payouts before retirement commencement may result in the repayment of allowances and tax benefits granted. The retirement provision deposit should therefore not be used as a reserve for unforeseen expenses.
The regulations provide exceptions, including the use of funds for certain residential purposes, payout of up to 30 % of capital at the start of the pension phase, or settlement of a small pension. In other cases early withdrawal of subsidised capital may be classified as improper use.
Prior to making contributions, it should be checked whether separate reserves exist for unemployment, car repairs, or unforeseen expenses.
How should an existing Riester contract be handled?
An existing Riester contract does not have to be terminated. Contracts concluded before 1 January 2027 retain the protection under previous regulations and may continue to be maintained.
The following options also exist:
- Continue the previous contract without new contributions,
- Switch to the new allowance system within the existing contract,
- Conclude a new contract and retain the old one,
- Transfer the accumulated capital to a new product.
A transfer is not advantageous in every case. Switching fees, new upfront costs, or loss of a guarantee existing in the old contract may arise. Costs, guarantees, remaining time until retirement, and risk profile should be compared before making a decision.
What is already determined, and which aspects regarding the retirement provision deposit from 2027 are still open?
The start date, subsidy mechanism, fundamental tax principles, and principal product variants are determined. The law is published and new products can be offered from 1 January 2027 onwards.
The following are confirmed:
- Basic allowance up to 540 euros per year,
- Child allowance up to 300 euros per child,
- Bonus for young people in the amount of 200 euros,
- maximum contribution 6,840 euros annually,
- no ongoing taxation of income during the accumulation phase,
- protection of existing Riester contracts.
The specific fees of banks, the list of available funds and ETFs, the starting dates of the offers from individual providers, as well as the actual investment results, remain unknown. ING announces the product for the launch of the system, but the full conditions have not yet been published.
Prior to selection, certification status, applicable fees, and the range of offered assets should be examined. For the reconciliation of annual contributions, provider documentation should be retained and included in the tax return. Taxando enables online tax return preparation; in more complex cases, recourse to professional advice can be sought.
FAQ
What is the Altersvorsorgedepot and when will it be available?
The Altersvorsorgedepot is a state-subsidized account for private retirement provision, allowing investment of funds among other things in mutual funds and ETFs. New products can be offered from 1 January 2027 onwards.
What is the amount of state support for the Altersvorsorgedepot?
The basic allowance amounts to a maximum of 540 euros per year. The first 360 euros of personal contributions are subsidized at 50%, additional contributions—up to a total limit of 1,800 euros—at 25%. For each child, an additional allowance of up to 300 euros per year may be granted.
Who is eligible for support?
Support is available, among others, to employees, apprentices, certain mini-jobbers, parents during periods of child-rearing, as well as to family caregivers. Entitlement to support also extends to certain entrepreneurs, freelancers, and members of occupational pension schemes.
Can the self-employed use the Altersvorsorgedepot?
Yes, the reform extends eligibility to individuals with corresponding income from self-employment or freelance activities. One requirement is the submission of a German tax return for the relevant year.
How does the Altersvorsorgedepot affect the tax return?
Contributions and entitled allowances can be claimed as special expenses. The tax office examines whether the tax advantage from deducting special expenses is higher than the allowances received and, where applicable, applies an additional exemption. Income remaining in the account is not subject to ongoing taxation.
Can any ETFs be invested in through the Altersvorsorgedepot?
No, only instruments that comply with the statutory list of eligible assets and the portfolio offered by the respective provider are available. This means that not every ETF available on a regular securities account can also be purchased in the Altersvorsorgedepot. The complete product lists are not yet available.
Does the Altersvorsorgedepot guarantee repayment of the contributed capital?
The standard Altersvorsorgedepot does not provide a capital guarantee; therefore, the value of the investment may increase or decrease. For investors with a higher need for security, separate products offering a guarantee of 80% or 100% of contributions are available.
What are the costs of the Altersvorsorgedepot?
The precise fees depend on the respective bank, broker, or insurer, and are not yet fully known. For the simplified standard account, the average annual impairment in value due to costs (effective costs) must not exceed 1%. However, this cap does not mean that every version of the Altersvorsorgedepot costs the same amount.
What happens to existing Riester contracts?
Riester contracts concluded before 1 January 2027 may be continued under the previous regulations. Transfer to the new support system or capital transfer to a new product without repayment of the previous support is possible; however, such a transition may involve costs.
When is a payout from the Altersvorsorgedepot possible?
The payout phase generally begins between the ages of 65 and 70. The funds may be withdrawn as a lifelong pension or within a payout plan lasting at least until the completion of the 85th year of life. At the start of the payout phase, a one-time lump sum payment of up to 30% is possible.
Maciej Szewczyk
He gained experience as a consultant on IT projects for many international companies. In 2017, he founded the startup taxando GmbH, where he developed the innovative tax app Taxando, which simplifies the filing of annual tax returns.
Maciej Szewczyk combines technological expertise with in-depth knowledge of tax regulations, making him an expert in his field. In his private life, he is a happy husband and father and lives with his family in Berlin.
