Cancelling a Riester contract

Whether you should cancel your Riester contract depends on your individual situation – as a general rule, cancellation is rarely the best choice.

What happens if you cancel?

• You receive the surrender value (often less than you paid in!)
• All state allowances must be paid back
• All tax benefits are taxed retroactively
• The payout is fully taxed (income tax)
• Result: you often get back significantly LESS than you paid in

Example:

• 15 years of payments: 15 × €2,100 = €31,500 own contributions
• Allowances received: approx. €2,775 (€175/year)
• Tax benefits: approx. €5,000
• Surrender value: approx. €28,000
• Minus allowances + taxes: approx. €20,000 net
• Loss: approx. €11,500

Better alternatives:

1. Making it contribution-free:

• You simply stop paying in
• Previous allowances and benefits are kept!
• The contract rests until retirement

2. Switching provider:

• Transfer the contract to a cheaper provider
• Everything is kept, but with lower costs

3. Wohn-Riester:

• Use the saved capital to buy a home
• The subsidy is kept!

When cancellation does make sense:

• Short term, few allowances received
• Contract with extremely high costs (commission 5%)
• Urgent high-interest debt (overdraft 10%)