Germany Replaces Riester — What the New Altersvorsorgedepot Means for Savers

Germany's Riester Reform Delivers a Successor — What the Altersvorsorgedepot Means for Your Retirement

After more than 20 years, Germany's Riester pension had long since peaked. High costs, rigid guarantee requirements, shrinking returns and an increasingly bureaucratic subsidy system had left many Germans deeply sceptical of private retirement savings. The government's answer came in the form of sweeping legislation: the Bundestag approved the private pension reform on 27 March 2026, with the Bundesrat following on 8 May 2026.

The result is the new Altersvorsorgedepot — a state-subsidised investment account available from 1 January 2027 to all citizens, including self-employed workers for the first time. The decisive difference from the Riester model: guarantees are no longer mandatory, and ETF investments are explicitly encouraged.

One important deadline: existing Riester contracts can still be opened under the old rules until 31 December 2026. From 2027 onwards, no new Riester products will be available.

How the New Subsidy Structure Works

The centrepiece of the reform is a redesigned state subsidy. Instead of a flat basic allowance (the old Riester model paid €175/year), the new system uses a percentage-based co-payment:

• First €360 saved per year: the state matches each euro with 50 cents — maximum €180 subsidy.
• From €360 to €1,800 per year: each additional euro earns 25 cents from the state — a further maximum of €360.
• Total maximum basic subsidy: up to €540 per year.

On top comes the child bonus: €300 per child per year, granted in full from a monthly contribution of just €25. A family with two children saving €150 per month will receive up to €1,140 in state subsidies per year — more than double what the old Riester system offered.

There is also a one-off starter bonus of €200 for anyone opening their first Altersvorsorgedepot before their 25th birthday.

ETFs Instead of Guarantees — Better Returns, More Risk

The most fundamental change from Riester is the investment strategy. Riester products were required to guarantee at least the return of all contributions plus subsidies at the start of the payout phase. That sounds safe — but it came at a significant cost: the guarantee forced providers to invest conservatively, significantly depressing long-term returns.

The Altersvorsorgedepot has no such requirement. Savers can invest entirely in broadly diversified global equity ETFs. Historically, a world index ETF has returned 7–9% per year over 30 years — far more than typical Riester products ever delivered.

The catch: markets can fall sharply just before retirement. The legislation therefore requires an automatic rebalancing towards safer assets as retirement approaches — similar to the lifecycle principle already used by many robo-advisors today. A statutory cost cap of 1% effective annual cost protects consumers. Many existing Riester contracts charge 1.5–2.5% per year — over 30 years, a massive drag on returns.

What Happens to Existing Riester Contracts?

Existing Riester savers need not worry about their accumulated capital. The state guarantees full grandfathering — no forced conversion, no clawback of subsidies or tax advantages. There are three options:

Option 1 — Keep the existing contract

Existing Riester contracts can continue unchanged under the old terms and with the current provider. This is the right choice if the contract has favourable conditions or is close to the payout phase.

Option 2 — Transfer to an Altersvorsorgedepot

Accumulated capital can be transferred in full to a new Altersvorsorgedepot without repaying any subsidies received. All tax advantages remain intact. The transfer may cost a maximum of €150, and is free of charge after five years with the new provider. This option is most attractive for savers who still have 15 or more years until retirement and want to benefit from higher ETF returns.

Option 3 — Pause contributions and open a parallel account

Anyone who does not want to close their Riester contract but still wants to participate in the new system can put the Riester contract on hold and simultaneously open an Altersvorsorgedepot. The accumulated capital is preserved while new contributions benefit from the improved subsidy structure.

Who Should Switch?

• Years left until retirement: savers with more than 15 years benefit most from compound growth in ETF investments.
• Current contract costs: contracts with costs above 1.5% p.a. should urgently be reviewed for transferability.
• Children: families with multiple children can gain significantly from the improved child bonus of €300 per child.
• Risk appetite: those who cannot accept market volatility are better served by a guaranteed product — even if it yields less in the long run.

The key message: do not rush. There is no deadline for transferring — the Altersvorsorgedepot only launches in January 2027, and transfers will be possible at any later point.

What You Should Do Now

• Review your existing Riester contract: request your annual statement and check the effective cost figure. A cost comparison often reveals whether a transfer might pay off.
• Check subsidy eligibility: self-employed workers are eligible for the first time. If you have never held a state-subsidised retirement product, the new system is worth a detailed look.
• Build a savings buffer: BankSorter lists current rates for savings and overnight accounts as well as fixed-term deposits — a useful complement to long-term retirement savings.
• Review your current account: a well-chosen current account with no hidden fees is the foundation of any sound financial plan.

Conclusion

The introduction of the Altersvorsorgedepot is one of the most significant reforms to Germany's private pension system in years. A 1% cost cap, better return prospects through ETFs and more generous subsidies for families represent genuine improvements over the long-criticised Riester model. Existing Riester savers should use the period between now and January 2027 to analyse their contracts and make a well-informed decision. Those who have not yet saved for retirement will have an attractive, state-subsidised and low-cost entry-level product available from 2027.