An early-start pension for children, retirement provision accounts for all generations: the framework for supporting private retirement provision is set to be reshaped. Here's what's planned.
A lot has already been announced. And much has been discussed. Now, at last, real movement does seem to be coming to the reform of how private retirement provision is supported. And not a moment too soon, because the issue is becoming ever more pressing. In November, the ifo Institute calculated that in 2026 the federal subsidy to the state pension scheme is expected to swallow up around a third of tax revenue. There's no getting around additional private provision.
At least there's now a draft law on the table. What sounds promising at first: private retirement provision is set to become “more return-focused, lower-cost, simpler and more flexible”, the draft says. This will make it “attractive once again to save privately for old age”. But not right away. The launch is planned for 1 January 2027. What's more, the proposal still has to pass through the Bundestag and Bundesrat.
New retirement provision accounts
The central building block in the reform plans is a new type of retirement provision account. It is meant to let people make better use of the return opportunities of the capital markets, because it allows them to do without guarantee promises. And to build wealth via ETF savings plans, for example.
Funds in particular are to be eligible for support. As well as “other suitable real-asset-oriented asset classes”. There is also to be a so-called standard account – a particularly easy-to-use variant that meets additional statutory requirements and where savers don't have to make any further investment decisions during the accumulation phase.
Those directly eligible for support are to receive a basic allowance of 30 cents for every euro paid in, up to an amount of €1,200. For a further amount of up to €600, the basic allowance is to be 20 cents per euro paid in. In addition, a child allowance of 25 cents per euro invested is planned, up to a maximum of €300 per child. And: if the contract is concluded before the saver's 25th birthday, there is a one-off career-starter bonus of €200.
As with Riester, no tax is due on investment income during the accumulation phase. This is intended to let the compound interest effect come fully into play as wealth is built. Payouts are then taxed later in retirement.
Pros and cons
Unlike the earlier proposal from former Finance Minister Christian Lindner, the retirement provision account is not to be allowed to hold individual shares. “Those would be completely unsuitable for retirement provision anyway,” says Martin Daut, CEO of quirion. “Anyone who just speculates on a whim exposes themselves to far too high a level of risk.”
For the “standard account”, a cost cap of 1.5 percent is envisaged. In Daut's view, capping costs is welcome in principle, but the cap has been set far too high. “An efficient, globally diversified ETF portfolio is available for far less. It would be a shame if there were once again plenty of loopholes for selling high-commission products. Products that – just look at Riester – end up doing nothing for savers.”
What happens to Riester
Anyone who already has a Riester contract can switch to the new retirement provision account model, but doesn't have to. In addition, there are still to be two supported variants with guarantees: products where 100 percent of the capital saved must be available at the start of the payout phase, and products with a capital guarantee of 80 percent.
“I can only advise everyone to do without guarantees,” Daut stresses. “Building wealth for retirement is an investment goal, not an insurance claim.” Guarantees, he says, are very expensive. “And they prevent the return opportunities of the equity markets from really being used.”
The early-start pension will come later
The early-start pension will still take some time. There is no draft law for it yet. But the federal government has already agreed on a number of key points. According to these, the aim is for the law to come into force retroactively on 1 January 2026. And thus to already apply to the 2020 birth cohort.
It is understood that the reform of private retirement provision is to be closely dovetailed with the early-start pension. Parents of every child who reaches the age of six are to be able to open an individual, funded, privately organised retirement provision account for their child with a provider of their choice. State support of ten euros a month is planned. It is to be possible to top up this amount with private contributions.
Smart retirement provision made easy
Whether with support or without, when it comes to retirement provision it's very important to think from the investment goal backwards. That means: you can't start early enough. Because the sooner you do, the more powerfully compound interest helps you reach your investment goal.
With such long-term investment goals as retirement provision, you should also be sure to avoid unnecessary risks through broad diversification. quirion's core portfolios are diversified according to scientific criteria. For retirement provision, quirion follows a glide-path concept: during the accumulation phase, the focus is on return opportunities, in order to build up as much wealth as possible. Over time, the mix of equities and bonds is adjusted in order to steadily stabilise the wealth you've built, step by step, up to the point of retirement.
“Private retirement provision is one of the most important investment goals. You shouldn't wait to get started until every detail is settled,” Daut emphasises. “And when the starting signal for the new support scheme is given, we'll have a suitable offering ready.”
You can find out more about our retirement provision here.
