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Riester-Rente

State-subsidized pension program.

How It Works​

You make contributions → state adds subsidies (Zulagen) and tax deductions.

Subsidies​

TypeAmount per Year
Basic (Grundzulage)€175
Per child born before 2008€185
Per child born from 2008€300
Bonus for young (contract signed before turning 25)€200 (one time)

Riester Subsidies

Example: family with 2 children (after 2008) receives €175 + €175 + €300 + €300 = €950/year in subsidies.

Conditions for Subsidies​

Minimum contribution: 4% of gross income (including subsidies), maximum €2,100/year.

Who Can Participate​

  • Employees paying into Rentenversicherung
  • Beamte
  • Spouses of participants (mittelbar förderberechtigt)

Self-employed usually cannot participate.

Pros​

  • Guaranteed subsidies
  • Tax deductions
  • Contribution guarantee

Cons​

ConDescription
Low returnsGuarantee = conservative investments
High feesMany products are expensive
Limited flexibilityMoney locked until age 62 (for contracts from 2012; for pre-2012 contracts — from age 60)
Taxable payoutsPension is taxed
Mandatory annuityCan't take everything at once

Critical Warning: Non-EU Relocation (Schädliche Verwendung)​

If you move your permanent residence outside the EU/EEA (e.g., to USA, UK, Switzerland, or your home country outside Europe):

ConsequenceDetail
Repayment requiredAll state subsidies (Zulagen) must be repaid
Tax benefits clawed backAll tax deductions received during contract lifetime
Classification"Schädliche Verwendung" (harmful use)

Changes Since 2023​

Since January 1, 2023, the rules have changed:

  • Moving outside the EU/EEA during the accumulation phase no longer triggers immediate repayment
  • "Schädliche Verwendung" only applies at the start of payout phase if you reside in a third country
  • Repayment is not lump-sum: 15% is deducted from each monthly pension payment
  • The old deferral mechanism (Stundung) has been abolished
Recommendation for Mobile Professionals

If there is any probability of leaving the EU permanently, avoid Riester entirely. The bureaucratic burden of repayment typically erodes all yield advantages.

Who Benefits​

BeneficialNot Beneficial
Families with childrenHigh income without children
Low/medium incomeSelf-employed
BeamteThose valuing flexibility

Alternatives​

Many experts recommend instead of Riester:

  • ETF savings plan in regular depot
  • Rürup for self-employed with high income
Riester in Decline and Planned Reform

Number of new Riester contracts has dropped significantly. The government plans a reform for 2027: Grundzulage will change from a fixed €175 to a contribution-proportional subsidy, up to €480 per year.

FAQ​

Not legal or financial advice.

I have a Blue Card and might move to the US in 5 years — is Riester a trap for me?​

If you leave the EU/EEA permanently, Riester triggers Schadliche Verwendung (harmful use). Since January 2023, the mechanism changed: subsidies are not reclaimed immediately but deducted at 15% from each monthly pension payment once retirement begins. For someone who contributed for only 5 years, the accumulated Zulagen (subsidies) and tax benefits are modest, and the reclamation mechanism reduces each pension payment significantly. The mathematical breakpoint: if the employer matching in bAV (betriebliche Altersvorsorge — company pension) or free ETF investing would generate higher returns with full flexibility, Riester's subsidy advantage disappears after reclamation. For mobile professionals with non-EU destinations, the opportunity cost of locked capital with reclamation risk typically outweighs the subsidy benefit.

My spouse doesn't work — can they still receive Riester subsidies?​

Yes, through mittelbare Fordereberechtigung (indirect subsidy eligibility). If one spouse is directly eligible (employed, paying into Rentenversicherung — statutory pension insurance), the non-working spouse can open their own Riester contract with a minimum contribution of €60/year and receive the full Grundzulage (basic subsidy, €175) plus Kinderzulagen (child subsidies) if children are assigned to that parent. Requirements: legal marriage, joint tax filing (Zusammenveranlagung), and the directly eligible spouse must contribute at least 4% of their gross income. The non-working spouse's own contribution is minimal (€60/year = €5/month), making the subsidy return on investment extremely high: €175 Grundzulage on €60 contribution = 292% return before fees.

I already signed a Riester contract with high fees — what now?​

Three options to evaluate. (1) Beitragsfrei stellen (make contribution-free): stop paying contributions, keep the contract dormant. You lose future subsidies but avoid further fee drain. The guaranteed capital (Beitragserhalt — contribution preservation) at retirement age is preserved. (2) Anbieterwechsel (provider switch): transfer the accumulated capital to a cheaper Riester product (e.g., a bank Sparplan instead of an insurance contract). The old provider may charge a transfer fee, and the new provider may have a waiting period. (3) Schadliche Kundigung (harmful termination): cancel the contract entirely, return all subsidies and tax benefits, keep the remaining capital minus fees. This option is rarely beneficial — the reclaimed subsidies and taxes typically exceed the remaining capital. A Honorarberater (fee-based advisor) can calculate the break-even point for your specific contract.

Can I use Riester to buy a home (Wohn-Riester)?​

Yes. Wohn-Riester allows using accumulated Riester capital (or future contributions) for purchasing owner-occupied residential property. Options: (1) withdraw the entire Riester balance for a down payment (Altersvorsorge-Eigenheimbetrag — retirement provision home equity amount), (2) use contributions to pay off a qualifying mortgage, or (3) combine both. The withdrawn amount goes into a virtual Wohnforderkonto (housing subsidy account) that accrues 2% annually. At retirement, the Wohnforderkonto balance is taxed as income — either spread over 17-25 years or as a lump sum with a 30% discount. Key restriction: the property must be owner-occupied and in Germany (or EU/EEA). If you sell the property and do not reinvest in another qualifying home within a defined period, Schadliche Verwendung (harmful use) applies.

The 2027 reform is announced — sign up for Riester now or wait?​

The planned reform (announced December 2025 by BMF — Bundesministerium der Finanzen, Federal Ministry of Finance) changes the Grundzulage (basic subsidy) from a fixed €175 to a proportional model of up to €480/year, tied to contribution levels. Existing contracts will transition to the new rules. Factors for the timing decision: (1) if you have children, the current Kinderzulage (child subsidy, €300/child) may change — existing contracts typically preserve acquired rights; (2) new contracts under the reform may offer better investment options (ETF-based Riester products are expected); (3) waiting means losing 1-2 years of subsidies that could have been collected. The reform is not yet law — the timeline may shift. For families currently collecting more than €500/year in Zulagen (subsidies), the opportunity cost of waiting is tangible.

Sources​