Retirement savings account: How subsidized ETF savings will work from 2027 onwards.
Digital innovations - Tax-optimized investments - Individual consulting
Retirement savings account: How subsidized ETF savings will work from 2027 onwards.
Digital innovations - Tax-optimized investments - Individual consulting
What is meant by a retirement savings account?
After more than twenty years, a fundamental reform of private retirement savings is taking place in Germany. The central element is the retirement savings account. It builds upon the existing concept of the state-subsidized Riester pension and combines improved return opportunities with simplified subsidies. The reform was passed by the Bundestag at the end of March 2026, and the Bundesrat gave its approval on May 8, 2026. Financial institutions are expected to be able to offer the retirement savings account from January 1, 2027.
With a retirement savings account, you have the opportunity to save privately for retirement and receive government subsidies. This is based on government-certified retirement savings contracts, which you can open as an account with numerous providers. Within the account, you will likely be able to invest in various funds, bonds, and similar securities. Whether investing via a fixed savings plan or through irregular deposits will be possible can only be determined once the specific contract offers on the market are available.
A cost-effective alternative is a savings plan for a global equity ETF, for example with monthly or annual contributions. An ETF (Exchange Traded Fund) tracks an index and allows for broad diversification in the shares of numerous companies simultaneously. Well-known examples of such passive funds are indices like the MSCI All Countries World Index or the FTSE All-World.
Which providers offer retirement savings accounts and which securities are permitted?
Various companies will be authorized to offer retirement savings accounts: banks, life insurers, investment funds, custody providers, and neobrokers. A state-run retirement savings account is also planned, but its specific design has not yet been finalized. Since this is a new product category with its own requirements, providers must first develop the accounts based on the law or adapt existing regulations.
Permitted facilities: Funds in risk categories one to five (out of a total of seven) that are tradable for retail investors will be permitted. The basis for this is the Synthetic Risk Reward Indicator (SRRI). The higher the SRRI, the greater the price volatility. A fund's risk indicator can be found in its product information sheet, also known as a fact sheet. Additionally, bonds issued by EU member states, as well as by German states or municipalities, will be eligible.
Not allowed: Shares of individual companies, certificates, cryptocurrencies and other complex or speculative securities will be excluded from the retirement savings account.
Is insurance a worthwhile option? Insurers will also be able to offer a retirement savings account. However, this is not a true investment account: the funds are embedded in a unit-linked pension insurance policy. As with other life or pension insurance policies, this incurs initial costs in the form of commissions, as well as annual administrative costs, which are generally higher for an insurance contract than for a pure investment account. Essentially, both variants are based on the same principles as a true retirement savings account, and neither offers guarantees. Taxation will be identical for both the investment account and the insurance wrapper.
Use for a property: Similar to the previous Riester home ownership scheme, the savings can generally also be used for your own property. Such a withdrawal is not considered detrimental to the subsidies, meaning you would not have to repay any allowances or tax benefits. Uses include not only purchasing or building, but also energy-efficient renovations or age-appropriate modifications. Important: This option is not automatically included in every contract; providers can decide this themselves.
Switching providers: During the savings phase, you can switch providers as often as you like. In the first five years of the contract, the transferring provider can charge up to €150, and the receiving provider can also charge up to €150. If the contract has already been running for five years or more, the switch will be free of charge. You also won't have to pay anything if you stay with the same provider and simply switch to a different product. By comparison, according to a ruling by the Federal Court of Justice (case no. XI ZR 200/03), providers are not allowed to charge fees for transferring a traditional securities account.
Who has the option of opening a retirement savings account?
In principle, anyone who is not yet fully retired can open a retirement savings account. However, not everyone is eligible for government subsidies. Those eligible include, among others:
- Employees
- Self-employed individuals who are compulsorily insured in the statutory pension insurance scheme
- Self-employed individuals under 67 years of age who file a tax return annually
- Members of a professional pension scheme
- Trainees, civil servants, judges, soldiers, and farmers
- Mini- or midi-jobbers and students with part-time jobs, provided they pay into the statutory pension insurance scheme
- Federal volunteers, voluntary military service members and members of the artists' social security fund
- Recipients of unemployment benefit I or citizen's benefit, provided that contributions were previously made to the statutory pension insurance scheme
- Early retirees, for example those receiving a reduced earning capacity or disability pension
- Caregivers of a relative with care level 2 for at least ten hours per week
Funding is also possible during parental leave or while receiving sick pay or transitional allowance.
Not eligible for funding These include, among others, mini-jobbers who have opted out of mandatory pension insurance, as well as people without their own eligible income, such as traditional housewives or househusbands.
Indirect funding: If you are married to or in a registered civil partnership with someone eligible for funding, you may be indirectly eligible. Funding is then possible even if you yourself do not belong to the directly eligible group.
Funding abroad: In the future, retirement savings will also be subsidized for people who do not live in Germany. The prerequisites are mandatory membership in the statutory pension system of the respective country and unlimited or deemed unlimited tax liability in Germany. German citizenship is not required. This is based on an EU directive on equal treatment within the EU and the European Economic Area. The regulation will apply from 2028 to all EU member states and countries with comparable pension systems, both for new and existing Riester contracts.
How much funding is available for retirement savings accounts?
The maximum basic allowance is set at €540 per year. The actual amount of funding granted depends on the contribution amount and the individual's tax burden. Parents also receive child allowances of up to €300 per child.
The basic principle: Money is paid into a retirement savings product, for example via an ETF savings plan, and the government provides support. This is done in three possible ways:
- Allowances: These funds flow directly into the deposit.
- Tax savings: The payments will be claimed in the tax return.
- Combination: In certain cases, both funding methods work together.
Structure of the basic allowance: The allowances are paid annually and are based on the annual contribution.
- For deposits up to 360 euros, 50 cents per euro deposited are granted, thus a maximum of 180 euros per year.
- For every additional euro up to a maximum of 1,800 euros, 25 cents are paid, i.e. an additional 360 euros annually.
- The maximum basic allowance therefore amounts to 540 euros per year.
The maximum eligible contribution is €1,800 per year, and the minimum contribution is €120 annually, or €10 per month. Young people who start their retirement savings plan before their 25th birthday will receive a one-off bonus of €200 as an additional incentive.
Child allowance: In addition to the basic allowance, parents receive a child allowance. For each child eligible for child benefit and assigned to the contract, the state adds one euro for every euro paid in, up to a maximum of 300 euros per child per year. Those who pay in 25 euros per month already receive the full child allowance.
An example: Someone who pays in €360 per year, or €30 per month, receives a basic allowance of €180. For each child, a child allowance of €300 is added. This results in a total allowance of €480, bringing the total to €840 paid into the contract.
Funding rates compared: The effectiveness of the subsidy is shown by the ratio of the allowance to the individual's own contribution.
- €120 deposit, two children: A basic allowance of 60 euros plus a child allowance of 240 euros results in 300 euros in allowances, a total of 420 euros in the account and a funding rate of 250 percent.
- 360 Euro deposit, one child: A basic allowance of 180 euros plus a child allowance of 300 euros results in 480 euros in allowances, a total of 840 euros in the account and a funding rate of 134 percent.
- Deposit of 1,800 euros, no children: A basic allowance of 540 euros, a total of 2,340 euros in the investment account, and a subsidy rate of 30 percent.
Those who contribute more will later have more capital available to generate returns. But even with smaller contributions, the high subsidy rate ensures that significantly more money flows into the contract than with investments without subsidies.
Tax incentives: The tax return requires you to state how much was paid into the contract in the previous year, i.e., contributions plus any subsidies received. For example, someone who contributes €1,800 and receives a subsidy of €540 can claim €2,340. With a marginal tax rate of approximately 33 percent, this would theoretically result in a tax refund of around €770. The tax office then automatically checks, as part of a so-called "favorable treatment" assessment, whether the subsidies or the tax refund are more advantageous.
What is meant by a standard custody account?
The standard portfolio represents a basic version of a retirement savings portfolio. Every provider is obligated to offer such a standard portfolio or, through a partnership, to refer to a partner's standard portfolio. It is aimed particularly at beginners who are not yet confident in making their own investment decisions. To enable a fair comparison of the offers, strict guidelines apply to its structure.
Investment in a standard custody account: It contains two pre-selected funds. One of these must be low-risk and classified in risk class 1 or 2 according to the SRRI (Standardized Risk and Reward Index), while the other, with a slightly higher growth potential, falls into class 3, 4, or 5. ETFs tracking the MSCI All Countries World Index, for example, are classified in class 4. The allocation is determined by the provider, but you can adjust it. Furthermore, there are requirements for how the assets must be reallocated from a certain point before your planned retirement, and you also have a say in this.
Cost: The effective costs of the standard brokerage account may not exceed one percent annually. Compared to free brokerage accounts and low-cost ETF savings plans, however, this is relatively expensive. The decisive factor will be the actual price at which providers offer the standard brokerage account. Furthermore, it should be fully digital and openable without any advisory services.
State standard depository: In addition to private offerings, a state-organized retirement savings plan is also planned. It is intended to be a cost-effective and straightforward standard solution for those who are undecided or inexperienced, and will be subject to the same regulations as private providers. The specific details are still being finalized.
What are the advantages and disadvantages of a retirement savings account?
Compared to a normal securities account, the retirement savings account has two disadvantages and four advantages.
The disadvantages:
- Reduced flexibility: Unlike a regular investment account, where you can withdraw money at any time, this plan is tied to a specific period, similar to a Riester pension. Withdrawing funds before the age of 65 would jeopardize the government subsidies. In such a case, you would have to repay any subsidies and tax benefits you received. However, you would be allowed to keep any profits generated from investing the subsidies.
- Limited investment options: While almost any available security can be purchased in a traditional securities account, the permissible investments in a retirement savings account are restricted.
The advantages:
- No taxes during the savings phase: No tax is levied on the advance lump sum during the term. This means more capital remains in the portfolio and can perform better than in a regular portfolio, assuming the same return and costs.
- Increased returns through the allowance: Government subsidies increase the value of the portfolio. With positive returns, this increases the profit, and the advantage grows further over the years due to the effect of compound interest.
- Tax-free reallocation: Anyone who transfers assets from one fund to another pays taxes on any gains made in a regular investment account. This is not the case with a retirement savings account. Especially in the years leading up to retirement, this can save several thousand euros, for example, by switching to a less volatile money market fund.
- Tax-free rebalancing: Those who hold multiple funds can restore their weighting tax-free during the savings phase, i.e., sell shares of a well-performing fund and buy more shares of a less well-performing one.
A calculation example: Someone who contributes €1,800 annually for 40 years, with a marginal tax rate of 30 percent, a base interest rate of 3.2 percent for the advance lump sum, a return of six percent, and effective costs of 0.2 percent per year, will receive approximately €269,000 net from their retirement savings account after taxes. This is about €48,000, or 22 percent, more than with a standard ETF portfolio.
How much can you deposit and what does the withdrawal process look like?
In addition to the upper limit for eligible deposits, a general maximum amount per contract is stipulated: €6,840 annually. Beyond the subsidized €1,800, a further €5,040 can therefore be deposited.
Is spending more than 1,800 euros worthwhile? It can certainly be advantageous to pay in more than the eligible €1,800. The benefit that no tax is levied on the advance payment during the contract period exists independently of the subsidy and therefore also applies to payments between €1,801 and €6,840.
Several contracts: A second contract would allow for an additional €6,840 to be paid in under the same conditions, for a total of €13,680 annually. More than two contracts per person are not permitted. Important: A second contract does not increase the subsidy. This subsidy is only granted on the first €1,800 per year, regardless of whether it is split between one or two contracts.
The payout phase: Two basic payout options are available: a payout plan until at least age 85 or a lifelong annuity. In both cases, you will receive monthly payments. The transition to the payout phase is possible between the ages of 65 and 70, or earlier if you are already receiving a statutory pension. In all options, you can withdraw 30 percent of your accumulated assets at the beginning, a process known as partial capitalization. This lump sum is subject to income tax at your personal tax rate. If you worked during the same year, it is usually more advantageous to schedule the payout for January 1st of the following year to avoid the overlap between your salary and the lump sum payment.
Payout plan up to age 85: You will receive monthly payments until at least age 85. Since the assets remain invested, the payout may increase or decrease. For the initial calculation, depending on your preference, 80 to 100 percent of the portfolio value at the time of transfer is used, minus any partial capitalization. The remaining amount is then divided by the number of months remaining until age 85. Because the portfolio value changes, the calculation is repeated regularly, at least every three years. If a balance remains at the end of the term, it will be paid out in a lump sum.
An example: With a portfolio value of €200,000 at age 65 and a partial capitalization of approximately €60,000, 80 percent of the remaining €140,000 is distributed over 240 months. Assuming a 3 percent interest rate and 0.5 percent annual costs, this initially results in approximately €470 gross per month. Since fewer months remain with each payment date and the capital continues to grow, the payout in this example increases over the years to approximately €1,420. Important: If the capital remains invested in the capital market, it is subject to fluctuations. Consistent growth as in this example is not guaranteed.
Lifelong pension: Here, payments don't end at age 85, but continue until death. The basis is also the portfolio value, however, the provider calculates with a very high life expectancy. The so-called annuity factor is used to convert the balance into a monthly pension. The annuity factor is individual for each contract and indicates how much pension is paid for every €10,000 of portfolio value. With €210,000 remaining in the portfolio, an annuity factor of 35 results in a gross pension of approximately €735 per month, a factor of 30 around €630, and a factor of 25 around €525 at the start.
Which option is suitable? This depends heavily on the specific products, especially the annuity factor, return, and costs during retirement, as well as personal preferences and health. With a lifetime annuity, an optional guaranteed payment period of ten or twenty years should be available: for a slightly lower annuity, the payment is guaranteed for this period, even in the event of death, and then goes to the surviving beneficiaries. Since providers are also permitted to offer special products exclusively for the payout phase, comparing providers before transitioning to retirement can be worthwhile.
Taxation of payouts and switching from a Riester contract
How you tax your monthly payouts depends not on the payout method, but on the contributions from which the returns originate. If you have contributed a maximum of €1,800 annually, the balance consists of eligible contributions, government subsidies, and the resulting returns. You then tax the monthly payouts at your individual tax rate.
- Taxation of the income portion: For the portion resulting from additional deposits exceeding €1,800, the income portion tax applies if paid out monthly. Your age at the start of the payout phase is the determining factor. For example, at age 65, 18 percent of the income from this portion is taxable; at age 67, it's 17 percent. This percentage remains constant throughout the entire payout phase.
- Half-income procedure: If you have the credit balance built up from additional deposits paid out in one lump sum and the contract ran for at least twelve years, half of the resulting income will be taxed at the individual tax rate.
- Withholding tax: If the contract ran for less than twelve years, withholding tax of 25 percent plus solidarity surcharge and, if applicable, church tax is levied on returns from deposits exceeding €1,800 per year. The lump-sum payment is then treated like a withdrawal from a standard securities account.
Switching from a Riester contract: Those who already have a Riester pension contract should be able to switch to the new subsidy system. The switch will not be automatic; an informal letter to the current provider should suffice. Whether this step is worthwhile depends on the costs and features of the new products, as well as the terms and conditions and the performance of the existing contract to date.
For whom is switching less worthwhile? Low-income earners with several children eligible for child benefits often benefit less under the new system. For example: A single father with a gross income of €20,000 and two children born after 2008 pays the minimum contribution in both systems. In the old system, this is €60 per year, in the new system €120. He would receive €175 basic allowance plus €600 child allowance, totaling €775, in the old system, but only €60 plus €240, or €300. This means that €835 per year flows into the contract in the old system, but only €420 in the new one. The subsidy rate would be 1,292 percent compared to 250 percent. He would have to pay twice as much in the new system and would still only have about half the amount in his contract at the end of the year.
Is a new Riester pension contract still worthwhile in 2026? From 2027 onwards, it will no longer be possible to conclude a new contract under the old subsidy system. Therefore, for people with lower incomes and several children, it may be worthwhile to take out an affordable Riester pension fund savings plan with the current subsidy conditions in 2026, as the government subsidy offers greater leverage with smaller contributions.
Transition to the payout phase: Currently, the provider must use a portion of the Riester pension savings to purchase a pension insurance policy, from which payments begin at age 85. This incurs additional setup and administration costs. After the reform, a payout plan only needs to run until age 85; an additional pension insurance policy will no longer be required. Those who can manage their retirement without the Riester pension are therefore often better off waiting until after the reform to switch. Those already receiving their pensions cannot switch to the new system.
What you can do right now: Anyone who doesn't yet have a private pension plan shouldn't wait for the reform, but start building wealth early, for example through an ETF savings plan. Every month your money is invested counts towards the long-term effect of compound interest.
Subject areas
Subject areas
Your contact person
Your contact person
Contents
Contents
Frequently Asked Questions
When will the retirement savings account be available?
Financial institutions will likely be permitted to offer retirement savings accounts from January 1, 2027. The legal framework was adopted in 2026, with the Bundestag giving its approval at the end of March 2026 and the Bundesrat following suit on May 8, 2026.
What are the differences between a retirement savings account and a Riester pension?
The retirement savings account represents a further development of the Riester pension scheme and offers higher return opportunities through funds and ETFs, as well as simplified subsidies. Unlike many traditional Riester products, there is no capital guarantee. Furthermore, the advance lump-sum payment is tax-free during the savings phase, and reallocations within the account remain tax-free.
What investments are permitted in a retirement savings account?
Eligible investments include funds in risk categories one to five out of seven according to the SRRI, as well as bonds issued by EU member states, German federal states, and municipalities. Shares of individual companies, certificates, cryptocurrencies, and other complex or speculative securities are not eligible.
What is the maximum amount of funding available?
The basic allowance is up to €540 per year, plus a child allowance of up to €300 for each child eligible for child benefit. Young people who start before their 25th birthday receive a one-off payment of €200. The exact amount depends on your contributions and your tax burden; the tax office automatically checks whether the allowances or tax savings are more advantageous.
What are the minimum and maximum deposit amounts?
The minimum annual contribution is €120, which equates to €10 per month. Contributions of up to €1,800 per year are subsidized. A maximum of €6,840 can be contributed per contract, or up to €13,680 across two contracts. No more than two contracts per person are permitted.
Am I allowed to use the credit balance to purchase a property?
In principle, this is possible, provided the relevant contract allows for it. This includes purchases, construction, energy-efficient renovations, or age-appropriate conversions. Such a withdrawal is not considered detrimental to subsidies, meaning that allowances and tax benefits do not have to be repaid.
What costs are involved in switching providers?
Within the first five years of the contract, both the outgoing and the incoming provider are permitted to charge up to €150 each. After five years, switching providers should be free of charge. Changing products within the same provider is also free of charge.
How is the payout made during retirement?
You can choose between a payout plan until at least age 85 or a lifelong annuity, with payments made monthly in each case. Up to 30 percent of the accumulated capital can be withdrawn as a lump sum at the beginning. The transition to the annuity is typically scheduled between the ages of 65 and 70, or earlier in the case of early retirement.
What tax treatment applies to the payout?
Payouts from subsidized deposits up to €1,800 annually are subject to taxation at the individual tax rate. For deposits exceeding this amount, depending on the type of payout, either the income portion taxation, the half-income procedure (for a term of at least twelve years), or, for shorter terms, the withholding tax applies.
Is it advisable to cancel my Riester pension contract or switch to another provider?
A hasty cancellation is generally not advisable. Switching to a retirement savings account is not advantageous for everyone; in particular, people with low incomes and several children often benefit more from the existing system. The transition does not happen automatically and can be requested informally from the provider. Those nearing retirement should consider whether waiting for the reform is worthwhile, as the payout phase will become considerably more flexible.
