The Riester pension: German state allowances, real costs and the 2027 reform
The Riester pension is Germany's subsidised private pension for employees and civil servants. The state adds yearly allowances and lets you deduct contributions from taxable income. In return the money is locked until retirement. New contracts can only be signed until the end of 2026. From 1 January 2027 a new product, the Altersvorsorgedepot, takes over, and anyone with an existing plan has to decide whether to keep it, pause it or move it.
An existing plan often is, if the allowances are large compared with what you pay in yourself. That is the case for families with children and for people on lower incomes, and for old contracts that still carry a high guaranteed interest rate. Taking out a new plan just before the reform makes sense in few cases. The weak points are charges and the mandatory capital guarantee, which leaves little room for equities. Cancelling is almost always the most expensive way out, because allowances and tax relief have to be repaid. If you may leave the EU for good, think twice before paying in more.
How the subsidy works, in plain terms
You qualify if you pay compulsory contributions to the German state pension, which covers most employees, or if you are a civil servant. A spouse without a job of their own can qualify through you. Freelancers outside the state scheme do not. Nationality plays no role: what counts is where you are insured.
To get the full allowance, your contribution plus the allowances must add up to 4% of your gross pay in the previous year, capped at €2,100. Your own share is what remains after the allowances, with a floor of €60 a year. Pay in less and the allowance is cut in proportion. The basic allowance is €175, and each child for whom you receive child benefit adds €300, or €185 for children born before 2008.
On top of that, contributions and allowances up to €2,100 can be claimed as special expenses (Sonderausgaben) in your tax return, using the form Anlage AV. The tax office checks whether the tax saving beats the allowance and credits the difference. Higher earners without children benefit almost entirely through this route. The pension is taxed in full when it is paid.
The honest picture: charges and a shrinking market
Riester insurance contracts are expensive. Acquisition costs are spread over the first five years, followed by ongoing administration and fund charges and charges during the payout phase. In March 2026 the consumer group Finanzwende looked at 18 Riester pension insurance products and found average effective costs of about 1.46% a year. It expects most of the contracts it examined to fall short of inflation.
The second drag is the guarantee. Providers must promise that at least your contributions and the allowances are there when the pension starts. With low interest rates that promise ties up most of the money in safe assets. Many insurers have stopped selling Riester for this reason, and the number of contracts has been falling since 2018 to just under 15 million, according to the Federal Ministry of Labour.
So do not compare premiums, which follow from the 4% rule. Compare effective costs, the pension factor and how much of your balance is actually invested in the markets. You find these figures in the product information sheet and in the yearly statement from your provider.
The 2027 reform: keep, pause or transfer
The Bundestag passed the pension reform act on 27 March 2026 and the Bundesrat approved it on 8 May 2026. From 1 January 2027 the subsidised product is the Altersvorsorgedepot, an investment account without a mandatory capital guarantee, alongside guaranteed products and a standard product with a cost cap. The new basic allowance depends on what you pay in: 50 cents per euro on the first €360 and 25 cents per euro on the next €1,440, which makes €540 on €1,800. Children add up to €300 each.
Contracts signed before 1 January 2027 are protected. Nothing is converted automatically. You can carry on under the old subsidy rules, switch to the new subsidy, or transfer your balance into an Altersvorsorgedepot. You cannot use both subsidy systems side by side, and a switch cannot be undone.
The right answer differs from contract to contract. An old traditional plan with a high guaranteed rate and a good pension factor is an asset that an investment account first has to beat. A costly unit-linked plan in which the guarantee leaves hardly any equity exposure is a candidate for a transfer. In between lies the option of pausing the old plan and investing new money elsewhere. We work through this with your contract documents.
What is covered
A monthly pension for life, from age 62 at the earliest, or 60 for contracts signed before 2012
A promise that contributions and allowances are available in full when the pension starts
A one-off lump sum of up to 30% of the capital at the start of the pension
Commutation of a very small pension into a single payment
Withdrawal for a home you live in yourself (Wohn-Riester)
Transfer of the accumulated capital to another provider
Pausing contributions without losing the subsidies received so far
Transfer of the balance to a surviving spouse's Riester contract without repaying subsidies
What is not covered
Taking the whole pot as cash: anything above 30% counts as harmful use
Cancelling without consequences: allowances and tax relief are reclaimed
Passing the full balance to heirs other than a spouse without deductions
A tax-free pension: payments are taxed in full at your personal rate
Retiring outside the EU and EEA without repaying the subsidies
Cover for occupational disability unless a rider has been added
Who needs it
Families with children, where allowances carry a large part of the contribution
People on low incomes who reach the full allowance with the minimum contribution
Holders of old contracts with a high guaranteed interest rate
Higher earners who use the tax deduction and have a low-cost contract
Expats who expect to stay in Germany or elsewhere in the EU until retirement
Who does not need it
Freelancers outside the state pension scheme: they are not eligible, except through a spouse
Anyone who may need the money before retirement and has no plans to buy a home
Anyone starting from scratch who can do without a guarantee: the Altersvorsorgedepot from 2027 is built for them
Anyone who plans to retire outside the EU and EEA
Wheel of misfortune
Spin the wheel of bad luck
Six things that really happen. The wheel picks yours and shows who pays.
Cost:
Budget policy Strong policy
See all six cases
Cancelling after eight years, all allowances and tax relief repaid, gains taxed. Budget policy: does not pay, Strong policy: does not pay. The clawback is statutory and hits every contract alike. The only loss-free routes are pausing, transferring or withdrawing for a home.
Insurer cuts the pension factor, less monthly pension per €10,000, for life. Budget policy: does not pay, Strong policy: pays. Basic terms allow a cut if life expectancy rises or interest rates fall. Strong ones guarantee the factor and recalculate in your favour at retirement.
Allowance not claimed for three years, €175 basic allowance per year, far more with children. Budget policy: pays in part, Strong policy: pays. With a standing application the provider files for you every year. Without one, only some of the missed years can be claimed back.
Market crash just before retirement, fund balance down by a third within months. Budget policy: pays, Strong policy: pays. This is where the guarantee earns its keep: contributions and allowances are there on the agreed start date. Strong contracts also lock in gains step by step beforehand.
Moving back to Ireland, no repayment, the contract rests. Budget policy: pays in part, Strong policy: pays. A move within the EU does not trigger a clawback. Basic contracts deduct something for paid-up status or keep charging fixed fees, strong ones do neither.
Retiring in Thailand, allowances and tax relief of all years repaid. Budget policy: does not pay, Strong policy: does not pay. Living outside the EU and EEA during the payout phase counts as harmful use. That is set by law, not by the contract.
What it costs
Your contribution follows largely from the 4% rule. What makes a Riester contract cheap or expensive is its charges: they reduce the balance over the whole term, and fixed charges weigh heavily on small contributions.
What drives the premium
Acquisition and distribution costs, spread over at least five years
Ongoing administration charges on contributions, allowances and balance
Fund charges in unit-linked and hybrid contracts
Charges during the payout phase
Cost of changing provider: the old provider may charge no more than €150
Riders such as a premium waiver in case of occupational disability
We deliberately give no price range because your contribution depends on income and allowances. The effective cost figure of your contract is in the product information sheet. Subsidy figures as of 2026.
The policy levels on the market
01
Traditional Riester annuity
The balance sits in the insurer's general account and earns the guaranteed rate of the year you signed, plus bonuses. Old contracts often carry rates that are no longer available anywhere.
02
Unit-linked with guarantee (hybrid)
Part of the money backs the capital guarantee, the rest is in funds, and the insurer decides the split. After weak years on the stock market almost everything can be stuck in the safe part.
03
Index-linked Riester
The balance stays with the insurer while bonuses track an index. Gains are locked in each year, and participation in rising markets is capped.
How to recognise a good policy
Criterion
Minimum standard
Strong policy
Why it matters
Pension factor
stated, but the insurer may lower it
guaranteed, with a best-of check when the pension starts
It fixes how much monthly pension you get per €10,000 of balance, for life.
Effective costs
above the market average, high fixed charges
well below average, no charges on allowances
Every tenth of a percentage point is missing from the balance decades later.
Change of provider
€150 transfer fee
no transfer fee, no surrender charge
After the reform, the way out matters as much as the contract itself.
Pausing and restarting
paid-up status with a deduction, restart only within a deadline
at any time without deduction, restart without a deadline
Job loss, parental leave or a stint abroad should not devalue the contract.
Allowance application
a new application every year
standing application handled by the provider
Forgotten applications are the most common reason for lost subsidies.
Withdrawal for a home
possible, for a fee
free of charge, partial withdrawals allowed
It is the only route to the money before retirement that keeps the subsidies.
Death before the pension starts
contributions paid
full contract balance, spouse transfer set out clearly
In unit-linked contracts the two figures can be far apart.
Funds and switching
small range, switching only by the insurer
wide range including low-cost index funds, lifecycle de-risking, free switches
The guarantee limits how much can be in funds anyway. That part should at least be cheap.
Insurers on the German market
The market has shrunk. Many German life insurers only administer their existing Riester contracts and no longer accept new customers, and from 2027 the old type of contract cannot be signed at all. The list names insurers that hold or offer Riester pension insurance. It does not say who still sells it today or which insurers we work with.
Insurer
Background
Allianz
Germany's largest life insurer, tied agents and brokers
Alte Leipziger
mutual insurer based near Frankfurt, mainly sold through brokers
Continentale
life insurer of the Dortmund-based Continentale group, agents and brokers
WWK
Munich mutual, agents and brokers
R+V
insurer of the cooperative banks, sold through their branches
DEVK
Cologne insurer with railway roots and its own sales force
Württembergische
life insurer of the W&W group, own sales force and brokers
Zurich
German life company of the Swiss Zurich group
HUK-COBURG
own distribution, does not work with brokers
Debeka
mutual with its own sales force, not available through brokers
The contract with a life insurer, traditional, unit-linked or index-linked. This page is about this type.
Riester fund savings plan
A contract with a fund company. The balance is turned into a drawdown plan followed by a pension when you retire.
Riester bank savings plan
Interest-bearing savings with a bank and no acquisition costs. Hardly any bank still opens new ones.
Wohn-Riester
A subsidised building society contract or loan for a home you live in. The subsidy goes into repayment and is taxed later through a notional account.
Altersvorsorgedepot from 2027
The successor: a subsidised investment account without a mandatory guarantee, plus guaranteed products and a standard product with a cost cap.
Myth or truth
True or false?
Five things people say about this insurance. Guess first, then see the answer.
Riester is a bad deal for everyone.
This is false.
False. For families with children and for low earners the allowances can cover a large part of the contribution. The picture is poor where high charges meet little subsidy.
Contributions and allowances are guaranteed when the pension starts.
This is true.
True. The law requires this promise in every Riester contract. It applies on the agreed start date and does not protect against inflation.
In 2027 my Riester contract will be converted automatically.
This is false.
False. Existing contracts are protected and continue unchanged. A switch to the new subsidy or into an Altersvorsorgedepot only happens at your request.
Foreigners working in Germany can get the allowances.
This is true.
True. Eligibility follows from compulsory insurance in the German state pension, not from nationality. Most employees qualify from their first German payslip.
If I move to another EU country I must repay the allowances.
This is false.
False. Within the EU and the EEA the subsidies stay. Repayment is due only if you live outside during the payout phase, or if you cancel.
Common mistakes
Cancelling the contract instead of pausing or transferring it
Not applying for the allowance, or not setting up a standing application
Leaving the contribution unchanged after a pay rise and losing part of the allowance
Not telling the provider about a new child or the end of child benefit
Leaving Anlage AV out of the tax return and giving away the tax relief
Moving an old contract with a high guaranteed rate into an investment account without checking
Signing a new contract weeks before the reform without knowing the costs of the first five years
Frequently asked questions
Questions and answers
Frequently asked
Can I still take out a Riester pension in 2026?
Yes, until the end of 2026, provided the insurer still accepts new business.
It only makes sense in a few cases, mainly on a low income with several children,
because the fixed allowances are then large relative to the contribution.
Keep the acquisition costs in mind:
they are spread over the first five years even if you move to the new system soon after.
What happens to my existing contract in 2027?
Nothing, unless you act.
Contracts signed before 1 January 2027 are protected and continue under the old subsidy rules.
You may switch to the new subsidy or transfer the balance into an Altersvorsorgedepot.
Using old and new subsidies together is not possible.
What does it cost to cancel?
You receive the surrender value, which is the balance after charges and any surrender penalty.
All allowances and the tax relief you received are deducted, and gains are taxed.
German law calls this harmful use.
In the early years there is often less in the contract than you paid in,
because of acquisition costs.
I am leaving Germany. Do I lose the subsidies?
Not if you stay within the European Union or the European Economic Area.
The subsidies already received remain yours, and the pension can be paid there.
If you live outside the EU and EEA when the pension starts or while it is being paid,
allowances and tax relief must be repaid.
Which country taxes the pension depends on the relevant double taxation treaty.
How much do I have to pay in for the full allowance?
Four per cent of your gross pay subject to pension insurance in the previous year,
capped at €2,100, minus the allowances you are entitled to.
If that comes to less than €60, you pay the minimum of €60 a year.
If you pay only half of the required amount, you get half of the allowance.
How is the Riester pension taxed?
In full, when it is paid.
Because contributions and allowances were subsidised,
the pension counts as income at your personal rate.
The same applies to the one-off lump sum of up to 30% at the start of the pension.
Can I move the contract to another provider?
Yes, the law provides for it.
The old provider may charge no more than €150.
The new provider may apply acquisition and distribution costs to no more than half of the
transferred capital.
Check first which guarantees and which pension factor the old contract contains,
because you lose them when you leave.
What happens to the money if I die?
A spouse or registered partner can transfer the balance to their own Riester contract and keep the
subsidies.
Alternatively a pension can be paid to the spouse and to children for whom child benefit is paid.
Other heirs receive the balance only after allowances and tax relief have been deducted.
NAMMERT insurance broker
Request quotes for Riester pension
We obtain quotes and come back with a comparison, free of charge.
You can write in English.
Thank you, we have your request.
We will be in touch within one working day. If it is urgent: +49 3375 29 12 77.
