Riester Is Dead for New Contracts. Its Replacement Is Better.
On 8 May 2026, the Bundesrat approved the Altersvorsorgereformgesetz — the Pension Reform Act that creates the Altersvorsorgedepot, a state-subsidised retirement savings account built around ETFs and investment funds. From 1 January 2027, no new Riester-Rente contracts can be concluded. The Altersvorsorgedepot is the official successor, and it fixes the single biggest flaw that made Riester a punchline for a generation of German savers: the mandatory capital guarantee.
Under the old Riester model, providers were required to guarantee 100% of your contributions at retirement. This forced them into ultra-conservative bond-heavy portfolios that returned barely enough to cover inflation, while administrative costs ate into what little growth existed. The Altersvorsorgedepot removes the capital guarantee requirement entirely. For the first time, the German state will subsidise your contributions into a product that can invest fully in equities and ETFs, accepting market risk in exchange for the long-term returns that a 30-year investment horizon actually demands.
The subsidy structure is also more generous and simpler than Riester's. The state contributes 50 cents for every euro you put in, up to €360 per year, then 25 cents per euro on contributions between €360.01 and €1,800. That is a maximum Grundzulage (basic subsidy) of €540 per year. Add the Kinderzulage of €300 per child per year , and a family with two children contributing €1,800 annually receives €1,140 in state subsidies — a 63% top-up on their own contributions.
This guide explains the full mechanics of the Altersvorsorgedepot: the subsidy math, the tax treatment, how it compares to the outgoing Riester model, what happens to your existing Riester contract, and how to prepare before the 1 January 2027 launch.
Important
The Altersvorsorgedepot is confirmed law, not a proposal. The Altersvorsorgereformgesetz was approved by the Bundesrat on 8 May 2026. The launch date of 1 January 2027 is fixed. Confirm exact subsidy figures against the official Bundesfinanzministerium FAQ and Bundestag Drucksache 21/4088 before making contribution decisions.
The Subsidy Structure: How the State Tops Up Your Savings
The Altersvorsorgedepot's subsidy system is the core selling point. Here is exactly how it works.
The Grundzulage (Basic Subsidy)
The state matches your contributions on a sliding scale :
| Your Annual Contribution | State Subsidy Rate | Subsidy Amount |
|---|---|---|
| First €360 | 50 cents per euro | €180 |
| €360.01 to €1,800 | 25 cents per euro | €360 |
| Above €1,800 | 0% | €0 |
| Maximum Grundzulage | €540/year |
The Kinderzulage (Child Subsidy)
For each child, the state adds €300 per year. This is paid to one parent (typically the one who receives Kindergeld). The Kinderzulage is granted from a minimum monthly contribution of just €25.
Case Study: Lena's Family Subsidy Math
Lena is a 34-year-old marketing manager in Munich with two children (ages 4 and 7). She earns €58,000 per year and wants to start an Altersvorsorgedepot in January 2027.
Lena's annual contribution: €1,800 (€150/month)
Subsidy calculation:
- Grundzulage on first €360: €360 × 50% = €180
- Grundzulage on remaining €1,440: €1,440 × 25% = €360
- Total Grundzulage: €180 + €360 = €540
- Kinderzulage (2 children): 2 × €300 = €600
- Total annual state subsidy: €1,140
Lena's first Altersvorsorgedepot year: €2,940 invested
The effective return on Lena's contribution:
- Lena contributes: €1,800
- State adds: €1,140
- Total invested: €2,940
- Effective immediate return: 63.3% before any market growth
Over 30 years, assuming a 7% average annual return on a global equity ETF:
- Lena's total personal contributions: €54,000
- Total state subsidies: €34,200
- Projected portfolio value at age 64: approximately €278,000
- Of which state subsidies and their growth account for roughly €105,000
Lena's projected depot at 64 (7% p.a. over 30 years)
That is the power of a 63% immediate top-up compounding over three decades.
No Capital Guarantee: Why This Is Actually Good News
The removal of the capital guarantee requirement is the most significant structural change from Riester. Under Riester, providers had to guarantee that you would receive at least 100% of your contributions (plus subsidies) at retirement. This forced them into conservative portfolios dominated by bonds and low-yield assets.
The Riester Problem in Numbers
A typical Riester contract from 2010 to 2025 returned approximately 1.5% to 2.5% per year after costs. With inflation averaging 2% over that period, the real return was close to zero — or negative. The capital guarantee consumed 15% to 25% of the portfolio's potential returns, according to analyses by consumer advocates.
The Altersvorsorgedepot Solution
Without the guarantee requirement, providers can invest your contributions in:
- Broad-market equity ETFs (MSCI World, FTSE All-World, S&P 500)
- Diversified multi-asset funds
- Individual stocks and bonds
- Any combination that matches your risk profile
The maximum annual cost is capped at 1% of the portfolio , preventing the fee drag that plagued many Riester products. And because the investment horizon for a 30-year-old contributor is three decades, the historical probability of a diversified global equity portfolio losing money over 30 years is extremely low.
Note
The Altersvorsorgedepot does not guarantee your capital. In a severe market crash, your portfolio value can fall below your contributions. However, the long-term historical return of diversified equity portfolios (7% to 9% nominal) significantly exceeds the returns available under the old capital-guarantee model. The trade-off is explicit: you accept short-term volatility in exchange for substantially higher long-term growth.
Tax Treatment: Contributions, Growth, and Withdrawals
The Altersvorsorgedepot uses a deferred taxation model (nachgelagerte Besteuerung), providing tax incentives during your working years in exchange for income taxation in retirement.
During the Accumulation Phase
- Your contributions (up to your maximum subsidized own contribution of €1,800 plus received state subsidies) are tax-deductible as Sonderausgaben (special expenses) under § 10a EStG. Furthermore, total annual deposits of up to €6,840 can be contributed to the depot for tax-sheltered growth (contributions above €1,800 do not receive the state match but compound tax-deferred until retirement).
- Investment growth within the depot is completely tax-free. No capital gains tax, no dividend tax, and no Vorabpauschale apply during the accumulation phase.
- State subsidies (Grundzulage and Kinderzulage) are deposited directly into your depot and are not taxed when received.
At Withdrawal (Retirement)
- All payouts from the subsidized portion of the depot are taxed as ordinary income at your personal income tax rate in retirement (§ 22 Nr. 5 EStG).
- If you choose to take a lump-sum withdrawal of up to 30% of the portfolio at retirement, that lump sum is also taxed at your personal income tax rate, not at the flat 25% capital gains rate (Abgeltungssteuer). The 25% Abgeltungssteuer (or partial investment exemptions) only applies to distributions originating from unsubsidized overpayments made above the €1,800 limit.
- The remaining 70% (or 100% if no lump sum is taken) must be distributed as a lifelong annuity or a structured payout plan up to age 85+.
Comparison with a Regular Brokerage Account
| Feature | Altersvorsorgedepot | Regular Brokerage |
|---|---|---|
| State subsidy | Up to €540 + €300/child/year | None |
| Tax on contributions | Deductible (§ 10a EStG up to €1,800 + subsidies) | Not deductible |
| Tax on growth | Tax-free during accumulation | 25% + 5.5% on gains above €1,000 exemption |
| Tax on withdrawal | Personal income tax on all payouts (incl. 30% lump sum) | 25% + 5.5% on gains |
| Capital guarantee | None | None |
| Annual cost cap | 1% maximum | Varies by provider |
| Lock-in | Until retirement (age 62+) | None |
Riester vs Altersvorsorgedepot: The Head-to-Head
For the roughly 16 million existing Riester contract holders , the critical question is: keep your Riester contract, or switch?
| Feature | Riester-Rente (Outgoing) | Altersvorsorgedepot (New) |
|---|---|---|
| Capital guarantee | 100% of contributions guaranteed | No guarantee |
| Investment options | Insurance products, bank savings, funds (guarantee-constrained) | ETFs, funds, stocks — full equity exposure |
| Grundzulage | €175/year | Up to €540/year |
| Kinderzulage | €185/child (pre-2008) or €300/child | €300/child |
| Tax deduction | Up to €2,100/year | Max €1,800 + subsidies (§ 10a EStG, up to €6,840 total deposit) |
| New contracts after 2027 | Not available | Available |
| Existing contracts | Remain valid, can be transferred | N/A |
| Cost structure | Often 1.5% to 2.5%+ | Capped at 1% |
Maximum basic subsidy: Riester vs Altersvorsorgedepot
Should You Transfer Your Riester Contract?
You can transfer an existing Riester contract to an Altersvorsorgedepot without repaying previously received subsidies. However, the decision depends on your specific situation:
Transfer if:
- Your Riester contract has high fees (above 1.5%)
- You have a long investment horizon (15+ years to retirement)
- You want equity exposure that the capital guarantee prevented
- Your Riester provider offers limited fund options
Keep your Riester if:
- You are close to retirement (under 10 years)
- Your Riester contract has low fees and decent fund options
- You value the capital guarantee for peace of mind
- Your Riester contract includes favourable annuity terms
Tip
If you are unsure, request a cost disclosure statement (Effektivkostenquote) from your Riester provider. If the effective annual cost exceeds 1%, transferring to an Altersvorsorgedepot with a 1% cost cap will likely improve your long-term returns. For a detailed comparison of the old and new models, see our existing German KVdR vs PKV guide for how retirement products interact with your health insurance status.
Who Is Eligible?
The Altersvorsorgedepot is available to:
- All individuals subject to German income tax who are compulsorily insured in the statutory pension system (gesetzliche Rentenversicherung)
- Self-employed individuals who are compulsorily insured (e.g., artists, teachers, midwives)
- Civil servants (Beamte) and equivalent public sector employees
- Spouses of eligible individuals, even if not themselves compulsorily insured (with a minimum contribution of €25/month)
You do not need to be a German citizen. If you work in Germany and pay into the statutory pension system, you are eligible.
The Frühstart-Rente: A Separate Product (Don't Confuse Them)
The Altersvorsorgereformgesetz also introduced the Frühstart-Rente, a state-funded children's pension that deposits €10/month into an Altersvorsorgedepot for eligible children from age 6. This is a completely separate product from the adult Altersvorsorgedepot. The Frühstart-Rente is for children; the Altersvorsorgedepot is for working adults. Do not conflate them. We cover the Frühstart-Rente in detail in our Frühstart-Rente guide.
How to Prepare Before 1 January 2027
The Altersvorsorgedepot launches on 1 January 2027. Here is your preparation checklist:
Before December 2026
- Review your existing Riester contract. Request the Effektivkostenquote and compare it to the 1% cap.
- Calculate your subsidy entitlement. Use our Altersvorsorgedepot Calculator to model your Grundzulage and Kinderzulage based on your planned contribution.
- Decide: transfer or keep? If your Riester fees exceed 1% and you have 15+ years to retirement, plan a transfer.
- Choose a provider. Banks, insurers, and fintech platforms will offer Altersvorsorgedepot products. Compare ETF selection, fees, and user experience.
- Set your contribution level. To receive the maximum Grundzulage of €540, contribute at least €1,800/year (€150/month). For the Kinderzulage, the minimum is €25/month.
From 1 January 2027
- Open your Altersvorsorgedepot. Complete the application with your chosen provider.
- Set up automatic contributions. Monthly direct debits ensure you never miss a contribution and lose subsidy entitlement.
- Select your ETF allocation. Choose a diversified global equity ETF or a target-date fund that matches your retirement timeline.
- File for subsidies. Your provider submits the subsidy application (Zulagenantrag) to the Zentrale Zulagenstelle für Altersvermögen (ZfA) on your behalf. Confirm this is set up.
The Provider Environment: Who Will Offer the Altersvorsorgedepot?
Multiple provider categories are preparing Altersvorsorgedepot products :
- Banks and direct banks (Deutsche Bank, Commerzbank, ING, DKB)
- Insurers (Allianz, ERGO, Zurich, HUK-Coburg)
- Fintech platforms (Scalable Capital, Trading 212, fincite)
- Fund companies (Union Investment, DWS)
The 1% annual cost cap means that low-cost ETF providers have a structural advantage. A global equity ETF with a 0.20% expense ratio plus a 0.50% platform fee stays well within the cap, leaving more of your money compounding.
The Bottom Line
The Altersvorsorgedepot is the private pension reform Germany has needed for two decades. Riester's capital guarantee strangled returns, its bureaucracy deterred participation, and its complexity confused savers. The new model is simpler, cheaper (1% cost cap), more generous (up to €540 Grundzulage plus €300 per child), and — critically — it lets you invest in ETFs that can actually grow your money over a 30-year horizon. The law is passed, the date is set, and the providers are preparing. If you have been putting off private retirement savings because Riester was terrible, the excuse just expired. Open an Altersvorsorgedepot in January 2027, set up a €150 monthly direct debit into a global equity ETF, and let the state add €540 on top every year. Your 64-year-old self will thank you.
