Riester-Rente — a pension with state subsidies

The Riester-Rente is a private pension that the state tops up with Zulagen (state allowances) and supports with a tax break. It was introduced in 2002 and is named after Walter Riester, a former Federal Minister of Labour. You can save through an insurance policy, a bank or fund savings plan or a Bausparvertrag (building savings contract), and the savings can also go towards a home you live in yourself. In retirement it pays out for life, and these payments are taxed. Under the current rules you can take out a contract until 31 December 2026. New contracts from 2027 follow different rules, for example as an Altersvorsorgedepot (state-subsidised retirement investment account).

The Grundzulage (basic allowance) is €175 a year. For each child for whom the family receives Kindergeld (child benefit), you get €300 if the child was born in 2008 or later and €185 if earlier. Under 25, there is also a one-off €200. You get the full allowances by paying the Mindesteigenbeitrag (minimum own contribution): 4% of last year’s income subject to pension contributions, capped at €2,100, minus the allowances, and at least €60 a year. Example: €40,000 income and one child born in 2015. You pay €1,125 and the state adds €475. Pay less and the allowances are cut proportionally.

Mainly people compulsorily insured in the German statutory pension scheme: employees and Azubis (apprentices), including those in a Minijob (marginal employment) who have not opted out of pension contributions, people on Arbeitslosengeld (unemployment benefit) and parents in the first three years of a child’s life. Beamte (civil servants) qualify if they have given consent to their Besoldungsstelle (pay office). A spouse without their own entitlement gets the allowances indirectly if you both have a contract and they pay in at least €60 a year. Grenzgänger (cross-border commuters) living in a neighbouring country and paying German pension contributions qualify too. Most self-employed people only get state support from 2027, under the new rules.

There is no fixed amount: it depends on contributions, allowances, charges, returns and the age at which payouts start. The one guarantee is that, when payouts begin, the pot holds at least what you and the state paid in. Payments are for life, from 62 at the earliest for contracts taken out since 2012 and from 60 for older ones. Up to 30% of the capital can be paid out at the start. If the pension would be no more than €59.33 a month (2026 figure), the provider may pay out the whole sum at once. The pension is taxed in full at your personal rate.

Contracts taken out by 31 December 2026 carry on under the old rules: a €175 basic allowance and €300 or €185 per child. From 2027 you can switch to the new subsidy by telling your provider, with the rest of the contract unchanged: up to €540 a year and up to €300 per child, in proportion to what you pay in and only from €120 of your own money. The switch cannot be undone and covers all your contracts; a new contract with state allowances triggers it automatically. I would do the maths first: a parent earning up to €20,000 with two children under 18 gets €775 for €60 under the old rules, but €300 for €120 under the new ones.

Taking the money out early counts as schädliche Verwendung (non-compliant use): you have to repay all allowances and the tax relief, and the gains in the contract are usually taxed. Before cancelling, I would look at two other options. You can let the contract rest (ruhen lassen) and keep the allowances already credited. Or you can move the savings to another Riester contract, and from 2027 into a new product with state allowances, again without repaying them.