If you have been living in Germany for years and want to build your life here, the pension question affects you. Not tomorrow. Now.
Germany's public pension system is not enough to live well on. That is not an opinion. It is a structural fact. The average woman's pension is €955 a month. The poverty risk threshold is €1,381. The gap is clear.
That is why Riester existed. And that is why it stopped working.
What Riester was and why it failed
In 2001, the German government created the Riester pension as a response to demographic change. The idea was simple: the state gives you subsidies if you save privately.
It sounded good. It failed in practice.
The problem was the design. The law required providers to guarantee 100% of contributions at retirement. To meet that guarantee, funds invested conservatively. Low returns. High insurance component. On top of that, high administration and sales costs reduced returns even further.
The result
By end of 2024 there were nearly 15 million Riester contracts. One in four had stopped receiving contributions. Millions paid fees for years and ended up with less than a standard savings account.
Riester did not fail through bad luck. It failed by design.
What comes next: the Altersvorsorgedepot
From 1 January 2027, Riester closes to new contracts. In its place comes the Altersvorsorgedepot, a state-subsidised private savings account. The Bundesrat has already approved the law.
The key difference: the mandatory full contribution guarantee is gone. That opens the door to ETFs and equity funds with higher expected long-term returns.
You have three options:
How much the state contributes
Why this matters if you are a migrant woman
No euphemisms.
- Contribution years in other countries are not always fully recognised in Germany. Lower projected pension.
- Lower average salaries. Lower contributions. Lower future pension.
- Work histories with gaps, part-time periods or informal employment. Every gap reduces the pension.
- Longer life expectancy. Your money needs to last longer.
- Language and system barriers. Historically lower access to formal financial products.
The pension gap between men and women is around 33%. Add the years outside the system due to migration and the risk of poverty in old age is real and concrete. Private supplementary savings are not optional if you want to maintain your standard of living.
Pros and cons of the new system
- Access to ETFs. The MSCI World has returned an average of 6.6% per year historically.
- The 50% subsidy on the first €360 makes a real difference for small savers.
- 1% cost cap and distribution of sales costs over the contract term.
- Switch providers after 5 years at no cost. Maximum €150 fee in the first 5 years.
- No Vorabpauschale tax during the savings phase.
- If you die before drawing down, your heirs receive the full capital.
- No guarantee means real risk. An ETF can fall 50% in a crisis. Recovery periods can last up to 15 years.
- The 1% Standarddepot cap is still high compared to 0.2% for a standard global ETF.
- A lifelong annuity pays less monthly than a fixed-term payment plan.
- The standard payment plan runs to age 85. You need to plan beyond that.
- Withdrawing early means returning all subsidies and tax benefits.
- It is voluntary. Without automatic enrolment, those who need it most tend not to join.
What to do now
There is no urgency. Products from the new system will appear in Q4 2026. Subsidies start in January 2027. You have time to compare.
At BFF I do not tell you which product to buy. My work is to help you understand the system, know your numbers and make informed decisions about your own money.
This article is educational and informational content. It does not constitute regulated financial advice (Anlageberatung). BFF Finance Coaching provides financial education and coaching, not personalised investment recommendations.