Riester Rente

The Government pays a yearly subsidy of €175 per person and €300 for each child (€185 for children born before 2008). You have to be paying contributions into the statutory pension scheme to be eligible for Riester Rente.

Key Features of Riester Rente

The Riester-Rente was introduced in 2002. Depending on what is most beneficial for the individual, either the tax rebate or the subsidy will be used by the tax office in their yearly income tax calculations.

Who is eligible for the Riester-Rente?

Everybody paying into the state pension scheme is entitled to a Riester-Rente. People who are not entitled but are married to or in a registered partnership with someone who is, are also eligible. They will receive the full subsidy but may only pay €120 per year in contributions.

How does the government subsidize contributions?

The government subsidizes contributions, and to obtain the full subsidy, 4% of gross income must be paid into the scheme. The subsidies provided count toward this 4%. A maximum of €2,100 per year can be paid into the scheme, and the full amount (including the subsidy) can be offset against taxes.

What are the subsidy amounts?

The full subsidy is €175/year for adults and €300/year for children born after 2008. For children born before 2008, the subsidy is €185/year. The subsidy is used immediately to reduce the monthly premium. It is necessary to submit a tax return every year to receive the full benefits available.

Moreover, the monthly pension received is taxable at the pensioner’s personal tax rate. Typically, as a pensioner in Germany, your tax rate is lower compared to when you are working.

What types of Riester-Rente products exist?
Most Riester-Rente products are fund-based. These offer a wide range of funds, including managed portfolios. Insurance-based products allow you to switch funds up to 12 times a year free of charge, and taxes on profits are deferred until the pension is drawn.

Are the contributions guaranteed?

Yes, the contributions, including subsidies, are 100% guaranteed. Capital cannot be borrowed against a Riester-Rente.

What is the minimum duration of the contract?

The minimum contract duration is at least 12 years. It is possible to capitalize 30% of the balance at the start of the pension draw-down phase. However, this will affect taxes in the year it is drawn.

When can the pension be drawn?

A pension can be first drawn at the age of 63 and is guaranteed for the rest of the beneficiary’s life. Additionally, capital can be withdrawn at any time if it is to finance a house that will be occupied by the Riester-Rente policyholder (Wohnriester).

What happens if the policyholder leaves Germany?

If the policyholder leaves Germany, their Riester-Rente policy will be set to non-contributory, but their investment in funds will continue to work for them. However, this policy is best suited for those planning to retire within the EU. Leaving the EU could result in the loss of subsidies and tax benefits.

What should policyholders be aware of when drawing the pension?

It is advisable to retain a post forwarding address in Germany. Additionally, a German bank account is required to draw down the pension.

What happens in case of death?

If the policyholder dies during the paying-in phase, the amassed amount will be paid into the partner’s Riester policy. The capital can also be received without subsidies and tax benefits.
If death occurs while drawing the pension, the pension will be paid to the beneficiary for a prearranged amount of time (Garantiezeit), which can range from 5 to 18 years. The remaining capital can also be received but without subsidies and tax benefits.
Only the spouse, registered partner, or children (until they finish their first education, up to age 25) may be beneficiaries.

To get the full subsidy you have to pay 4% of your gross earnings into the scheme up to a maximum of €2,100/year.

The premiums can be offset against tax and are therefore taxed when payed out. This has the advantage that taxes are normally far lower as a pensioner because the income is not so high. The earliest pay out opportunity is at age 63. It will pay out as a lifelong pension, but you can draw up to 30% of the saved amount as a capital payment. Most of the tariffs offered by the different insurance companies are fund savings based, offering a higher return in the current low interest market. It offers the added bonus that all the premiums and subsidies that are paid in are guaranteed, meaning that if the fund loses money, you do not.

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