Retirement Provision

The German Bundestag passed comprehensive reform of tax-subsidized private retirement provision on 27 March 2026. This marks the end of the Riester pension era – replaced by the retirement depot with significantly altered investment rules. The Federal Government had already adopted the reform draft on 17 December 2025, with the Bundestag's Finance Committee making further amendments in recent weeks.

Retirement Depot: ETFs instead of Guarantees

The centerpiece of the reform is the retirement depot, a funded supplementary provision focused on real-value-oriented asset classes and equity funds (ETFs). An ETF (Exchange Traded Fund) is a stock exchange-traded index fund that replicates the performance of a stock market index like the DAX or MSCI World and is characterized by low costs.

The decisive difference from previous Riester promotion: the contribution guarantee is eliminated. With Riester products, providers had to guarantee that at the start of the payout phase at least 100 percent of paid-in retirement provision contributions (personal contributions and government subsidies) would be available. This restrictive guarantee requirement is being relaxed to enable higher return opportunities.

Return Potential through Long Investment Horizon

The Federal Finance Ministry justifies the system change with the compound interest effect over long periods. Funded supplementary provision in retirement is fundamentally suited to real-value-oriented asset classes with attractive return expectations, according to the ministry in its January 2026 monthly report. The long investment horizon amplifies the compound interest effect and typically mitigates short to medium-term value fluctuations until retirement.

Specifically, the Federal Finance Ministry calculates: with an average return of 7 percent per year, annual contributions of 1,440 euros could grow to over 30,000 euros by retirement age. This return assumption is significantly above the historical yields of classic Riester products, which often relied on safe but low-yield investment forms due to guarantee requirements.

State Support Remains

The state continues to pay monthly subsidies for the retirement depot. According to the Federal Government, the reform addresses all generations and all income groups. A new element is the so-called early-start pension being integrated as an option in the retirement depot – details on the specific design of this component are currently not publicly available.

Occupational Pension Schemes: Adjustments at Year-End

Parallel to private retirement provision, regulations on occupational pension schemes (bAV) were also adjusted. Since 1 January 2026, the commutation limits for low bAV pensions are 59.33 euros for ongoing occupational pensions and 7,119 euros for capital benefits (Source: AOK Employer Service). Commutation by the employer is possible both upon exit and during the pension benefit phase.

The tax exemption on social contributions upon payout is adjusted annually. The second occupational pension strengthening act 2026 brought far-reaching changes.

Classification: Paradigm Shift in Retirement Provision

The reform marks a fundamental paradigm shift in state-subsidized retirement provision in the DACH region. While the Riester pension, since its introduction in 2002, focused on capital preservation and security, return opportunities are now at the forefront. Critics of the reform are likely to object to the missing guarantee – investors will in future bear full market risk. Supporters argue that the previous guarantee requirements dampened returns too much, and that equity investments, particularly over long periods of 30 to 40 years, have historically delivered positive returns.

Whether the reform brings the hoped-for expansion of private retirement provision remains to be seen in the coming years. The Riester pension recently suffered from declining new business and high complexity – the retirement depot is intended to solve these problems through simplicity and transparency.