Riester pension

The Riester pension was the best-known state-subsidised private pension plan in Germany – but in 2027 it will be replaced by the new retirement savings depot (Altersvorsorgedepot).

How does (did) it work?

• Own contribution: 4% of the previous year's gross income (min. €60/year, max. €2,100)
• Basic allowance: €175 per year
• Child allowance: €185 (born before 2008) or €300 (from 2008) per child
• Career starter bonus: €200 (one-off, under 25)
• OR: deduction as special expenses of up to €2,100 (whichever is more favourable)

Why Riester failed:

• Contribution guarantee: 100% of payments had to be guaranteed → hardly any shares possible → meagre returns (1–2%/year)
• High costs: commissions and administration fees ate up the returns
• Complicated: allowance applications, tax return, contract terms
• Result: 4.6 million of the 16.6 million contracts were cancelled

What to do with an existing Riester contract?

• Make it contribution-free: simply stop paying in – allowances and tax benefits are kept
• Wohn-Riester: use it to buy a home
• Transfer: possible into the new retirement savings depot from 2027
• Cancellation: you have to pay back allowances + tax benefits – almost always a losing deal