The Riester pension has been a popular option for private pension provision for over 15 years. As it is subsidized by state allowances and offers tax advantages, it is particularly worthwhile for families with children. Nevertheless, the Riester pension is no longer profitable for everyone these days and also has disadvantages. We present everything you need to know about this topic in more detail below.
Employees, but also the self-employed or civil servants are allowed to take out a riester, provided they meet certain requirements. Married couples may save through their spouse.
Other beneficiaries of the Riester pension include
The state subsidizes Riester contracts in two ways:
In order to benefit from the full subsidy, you must pay at least 4 percent of your gross income into the Riester pension each year. The allowances are already included. You can claim a maximum of 2,100 euros for tax purposes as part of the Riester pension.
A Riester contract is subsidized by the state with an annual basic allowance of 175 euros. If you have children born before 2008, there is an additional allowance for children of 185 euros. For children born in 2008 or later, you will receive an allowance of 300 euros.
Please note that the child allowance is only paid out for as long as you receive child benefit.
If your child is studying or training, the Riester pension allowance is extended until the age of 25.
Once you have taken out a Riester contract, you generally pay at least 4% of your gross income into the Riester pension each year for your retirement provision. The calculation is based on your salary from the previous year.
Here is an example: If you earned 38,000 euros gross in the previous year, you pay in 1,520 euros in the new year. The state allowances are deducted from this.
It is quite possible that your own contribution to the Riester pension is eliminated by the allowances alone. In this case, you only pay a minimum contribution of 60 euros per year so that you are entitled to the state subsidy for the Riester pension.
Riester contracts for old-age provision are available in various forms. Before taking out a Riester contract, you should seek comprehensive advice on which type is best suited to you and your retirement provision.
Riester pension insurance is the classic Riester product that guarantees you a lifelong pension with fixed benefits. Security plays a key role here: you already know at the time you take out the policy how high the pension will be later on. After taking out the contract, you pay four percent of your gross income (maximum 1,925 euros) into the Riester pension each year and receive a state allowance of 175 euros. This means you can claim a total of 2,100 euros against tax.
Currently, around two thirds of all Riester contracts are Riester pension insurance policies. However, this does not mean that state-subsidized pension insurance is also the most profitable Riester pension option: although it offers you security, the pension is not particularly high when interest rates are low. In addition, Riester pension insurance is the most expensive product compared to the other variants, as high administrative costs eat up a considerable proportion of the contributions paid in during the first few years of the Riester pension contract.e of how you can proceed when comparing supplementary dental insurance.
Around a fifth of all Riester contracts are fund savings plans. Despite low interest rates, this Riester product still offers the highest returns and is therefore particularly worthwhile for young people. Unlike normal fund savings plans, at least the contributions paid into this product and the allowances are available in the Riester account from the time of retirement. In return, a certain proportion of the money saved is invested in secure pension funds.
Please note that this form of retirement provision can be affected by price fluctuations depending on the term: Bad times on the stock market have a direct negative impact on your return. The risk of this pension product is correspondingly high. You are only guaranteed the contributions paid in as well as the government allowances. However, with a longer term and starting the contract at a young age, price fluctuations can be compensated for somewhat.
The aim of housing Riester is for you to be able to live in your own property in old age and no longer pay rent. To ensure that savers achieve this goal more quickly, the state supports Riester savers with allowances or tax breaks. If you would like to benefit from housing Riester, a few conditions apply:
With the help of housing Riester, you can receive up to 300 euros per year to repay a property loan. Important: The intended use is mandatory for claiming the subsidy. You may only use it for real estate financing or for the age-appropriate conversion of a property.
You can also apply for housing Riester in conjunction with a home loan and savings contract. You can also convert an existing home loan and savings contract into a Riester contract.
The Riester bank savings plan initially works in a similar way to a normal bank savings plan: Your balance and the savings installments earn interest continuously. However, interest rates are currently very low, meaning that you can almost only generate income through state subsidies. To be entitled to this, you must also pay at least four percent of your gross income from the previous year into your Riester contract. You will then receive 175 euros a year from the state as a subsidy. You can also deduct the deposits from your taxes.
With the Riester bank savings plan, you enjoy a high degree of security, as price fluctuations have virtually no impact on the return. The costs during the savings phase are also relatively low. Depending on your individual situation, you can benefit from tax advantages or state subsidies - although other forms of Riester pension also offer this. Interest income is extremely low with this product, which is why the Riester bank savings plan is hardly ever used.
The savings phase of the Riester pension normally ends when you retire. This automatically marks the start of the payout phase of your Riester pension, which you receive in addition to the statutory pension as a retirement provision. It is made up of the credit balance saved over the term of the contract from the contributions paid in, the state allowances and the return.
An important question is: How much do you actually get out of the Riestern? There is no general answer to this, as the amount of the payments always depends on how much you have paid into your Riester contract.
In general, however, the higher the amount saved and the longer the contract term of the Riester pension, the higher your return will be. The state allowances are also a decisive factor. There are also differences between the individual Riester products. We therefore recommend that you take a closer look at various products and compare the providers with each other before concluding a contract. If you have any questions about the Riester pension and state subsidies, we will be happy to help.
You can find out the approximate first payment date by looking at the pension notification from the German Pension Insurance. However, it also depends on the agreements you have made with your insurance company. As a Riester saver, you can also help determine the payment date to a certain extent.
The following cases must be distinguished:
Our recommendation: You should only take advantage of this scheme if you are unable to continue working. If your health allows you to continue working beyond the age of 60, this will only have advantages in terms of the return on your pension.
If you terminate your Riester contract earlier than planned or use the amount saved for other purposes, this is known as harmful use. This means that you will have to pay back any subsidies you have received and includes both allowances and tax benefits.
If you want to use the balance to buy a property to live in yourself, there is of course no repayment obligation.
Please note that the interest earned must also be subsequently taxed as other income.
We recommend that our customers close their Riester contract rather than terminate it.
This has various advantages for you:
As the purpose of the Riester pension is to close the pension gap in old age, you should be aware that if you stop paying contributions, the allowances may be reduced and you will therefore receive less money. The originally calculated pension will also be reduced accordingly during the dormant period of the Riester contract.
In October 2024, the German government published draft legislation for a reform of private pension provision. It contains plans for extensive changes to the Riester pension.
The main points of the draft legislation are an increase in the maximum contribution limits, a reduction in the contribution guarantee and a change to the allowance system. In addition, the introduction of a new retirement provision model equivalent to the Riester pension is planned: the so-called retirement provision deposit.
The reform is to be passed before the end of this legislative period. The planned start date for the changes is January 1, 2026.
Whether you make provision with the Riester pension or otherwise, your retirement provision must match your personal needs. First and foremost, retirement provision is nothing more than asset accumulation. Basically, everyone has to decide for themselves whether they want to take advantage of the Riester pension as a retirement provision. If you are prepared to invest more money, the Rürup pension may be the better choice.
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