Private savings for retirement are increasingly crucial, as many individuals find government pensions inadequate for maintaining their living standards. Starting in 2026, a new retirement savings depot with state support will allow citizens to invest in the capital market for additional retirement income. This initiative includes significant changes to the existing Riester pension system, which has seen a decline in popularity due to high costs and low returns, allowing savers more flexibility in investment options without mandatory guarantees.
For many savers, private retirement planning is more crucial than ever. Often, the statutory pension is insufficient to maintain one’s standard of living. A newly proposed retirement savings depot aims to address this pension gap.
In 2026, citizens are expected to have access to state-supported retirement savings options. The retirement savings depot will allow individuals to invest money in the capital market and receive additional income during retirement.
In conjunction with the launch of this new depot, the government plans significant reforms to the existing Riester pension scheme, which has been in place for over 20 years. The high costs and resulting low expectations for additional pension benefits have led to a decline in popularity among savers. In recent years, many of the nearly 16 million existing contracts have been canceled or are no longer being contributed to.
Many experts consider the Riester scheme unprofitable and too costly, a sentiment echoed by recent pension statistics.
New Initiatives
The current government is proposing several new measures to alleviate these issues, as outlined in a recent legislative draft. Central to this proposal is the retirement savings depot, which diverges from traditional Riester principles. Thomas Richter, managing director of the German Investment Funds Association (BVI), explains: ‘Historically in Germany, retirement savings had to include a capital preservation guarantee and provide a lifelong annuity. These requirements are no longer included in this legislative proposal.’ Moving forward, savers can invest for retirement ‘without expensive capital preservation guarantees that significantly reduce returns and without a lifelong annuity, which is also costly and reduces yield.’
This might be unfamiliar for many Riester savers, who benefit from guaranteed capital in their contracts, as it involves a fundamental change. According to the proposed legislation, savers will have the freedom to independently invest in the capital market and choose from various securities. ‘Currently, three main product categories are envisaged: funds, government bonds, and individual stocks, including both active funds and passive ETFs,’ adds Richter. However, highly risky securities such as leveraged products will likely be excluded.
Individuals looking to save for retirement or considering buying property can now invest in securities funds.
20% Government Contribution
Similar to the Riester pension scheme, the retirement savings depot will receive state funding, which, according to government plans, will be even more generous than the Riester model. Klaus Morgenstern from the German Institute for Retirement Provision (DIA) explains: ‘For every euro contributed, there’s a 20% bonus, capped at a specific limit. Additionally, there’s a 25-cent per euro child benefit, along with extra incentives for young professionals and low-income earners.’
The funding applies to a maximum personal contribution of €3,000 per year, with plans to increase this cap to €3,500 starting in 2023. In contrast, the Riester scheme has a cap of €2,100, which already includes government allowances. According to retirement expert Morgenstern, this new framework is clearer and requires less administrative effort than the Riester funding setup.
The Young Union is advocating for significant reforms in pension policies.
Pension Withdrawal from Age 65
Upon reaching retirement age, savers will have the option to receive a lifelong pension from their accumulated capital or withdraw funds according to a planned withdrawal scheme until at least the age of 85, with the earliest retirement age set at 65. For existing Riester contracts, pensions can be accessed as early as 62 years, and for contracts initiated before 2012, withdrawals can start even from age 60.
In addition to the state contribution, the retirement savings depot also offers tax advantages: as with the Riester scheme, gains accumulated during the contribution phase from funds and stocks are tax-free, meaning no capital gains tax applies. However, future pension payments will be taxed at the individual’s income tax rate.
It remains unclear whether amounts contributed above the subsidized limits will also be tax-exempt. Such ‘overpayments’ are permissible under Riester contracts. If allowed under the retirement savings depot, this savings method could prove more attractive than independent investments in appropriate stocks or funds.
After a lengthy career, many employees wish to retire as early as possible.
Tax-Deductible Contributions
Another tax advantage, already available in the Riester scheme, is that contributions can be deducted as special expenses from taxable income. Thomas Richter from the BVI views the proposal positively: ‘We are confident that the product will be well-received,’ he states, emphasizing the importance of encouraging more people in Germany to save for retirement, especially given the challenges facing the