Germany's Altersvorsorgedepot vs Riester: Should You Keep Your Plan or Switch?
The arrival of a new pension product does not, on its own, tell you whether an existing plan is still right for you. Contractual guarantees may remain valuable, while other investment options can offer additional return potential. The decision therefore depends not only on what a new product makes possible, but also on the terms you could lose by switching.
Germany's Altersvorsorgedepot, a retirement investment account that providers can offer from 1 January 2027, creates new options for government-supported private retirement saving. Existing Riester pension plans are not automatically cancelled or converted as a result. Savers can generally continue with their existing plan or choose a different option.
One distinction is particularly important: Switching to the new rules for government allowances and tax relief is not the same as transferring accumulated savings into an Altersvorsorgedepot. These decisions have different implications for government support, guarantees and contract terms.
This article answers five key questions:
What options are available for existing Riester pension plans?
Riester pension plans taken out before 1 January 2027 are generally protected by transitional rules. They can continue under the existing support arrangements until the payout phase begins. The launch of the new system does not, in itself, require savers to replace their plan or transfer their existing savings.
One alternative is to keep the existing plan and switch only to the new rules for government allowances and tax relief. This requires a declaration to the provider. The plan's other terms generally remain unchanged. This option separates the choice of support system from the choice of investment product.
Existing Riester savings can also be transferred to a new certified retirement savings contract. The destination can be an Altersvorsorgedepot without a capital guarantee or a new product with a guarantee. Previously received government support does not have to be repaid solely because of such a transfer. However, the terms of the new contract then apply.
Another option is to stop contributing to the existing plan while taking out a new one. Stopping contributions means that no further payments are made into the old plan for the time being. Its accumulated savings are not automatically transferred. Taking out the new contract does, however, affect the applicable rules for government allowances and tax relief, even when the old plan remains in place.
Cancelling a plan and having the money paid directly to the saver is a separate decision. Where subsidised savings are paid out outside the circumstances permitted by German law, the allowances and additional tax relief attributable to those savings generally have to be repaid. Transferring money to another retirement savings contract without triggering repayment of support is therefore different from withdrawing it into your own bank account.
What changes when you switch to the new support system?
When only the support arrangements change, the existing Riester pension plan generally retains its other terms. A contractual guarantee or a guaranteed annuity conversion factor (Rentenfaktor) does not disappear simply because the support system changes. Equally, this change does not turn the plan into an Altersvorsorgedepot with new investment options. Choosing the new support arrangements does not require the existing provider's consent.
What changes is how government allowances and tax benefits are calculated. The declaration takes effect from the contribution year in which the provider receives it. The question is therefore not simply whether the new system looks attractive in general, but how it applies to the saver's actual contributions and personal circumstances.
Under the existing Riester system, the basic allowance is EUR 175 a year. Subject to the relevant conditions, child allowances add EUR 185 for children born before 2008 or EUR 300 for children born in 2008 or later. Receiving the full allowance requires the applicable income-based minimum personal contribution to be paid.
Under the new system, the basic allowance depends instead on the contribution actually paid. Directly eligible savers can receive up to EUR 540 in basic allowance for a personal contribution of EUR 1,800. The child allowance is also contribution-based and reaches its maximum of EUR 300 per eligible child with a personal contribution of EUR 300. A higher maximum allowance therefore does not automatically mean that the new system provides more support at every contribution level.
Any additional tax relief also needs to be considered. Under both systems, the German special expenses deduction (Sonderausgabenabzug) may provide a benefit beyond the allowance entitlement. Comparing only the basic allowance is therefore not enough.
Which guarantees and costs matter before transferring your savings?
Transferring savings involves more than comparing the amount of government support. Giving up an existing plan means replacing its terms with those of the new product. Relevant features include contractual capital guarantees, guaranteed minimum benefits, annuity conversion factors and any cover for surviving dependants. Not all Riester pension plans provide the same guarantees or benefits.
An annuity conversion factor determines the monthly pension calculated from a given amount of savings under the contract, for example per EUR 10,000 of capital. In an insurance-based plan, a guaranteed conversion factor can therefore have a significant bearing on future benefits. Looking only at the accumulated savings does not capture this feature of the contract.
The difference between the current transfer value and a benefit guaranteed at a later retirement date is equally important. The Riester contribution guarantee generally applies at the start of the payout phase. It does not mean that a saver switching earlier can always transfer at least the full amount of all contributions paid. For market-linked plans, current market conditions can also affect the amount available.
The ongoing costs of the existing plan need to be compared with those of the new contract. Potential transfer charges and the costs of taking out the new plan must also be considered. A transfer that preserves government support is not necessarily free of charge. A meaningful comparison requires the specific terms of both contracts and the amount that can actually be transferred.
Set-up costs already paid should be distinguished from future charges. Those costs were incurred in the past and cannot, on their own, justify either keeping or switching the plan. What matters financially is the costs, benefits and return potential of each option from the point when the decision is made.
Finally, transferring to an Altersvorsorgedepot without a capital guarantee changes the level of protection. Greater flexibility to invest in capital markets can offer higher long-term return potential. Better performance is not guaranteed, however, and the value of the savings may be below the contributions paid in even at retirement. Any cost comparison therefore needs to account for the change in risk.
When might it make sense to keep a Riester pension plan?
Keeping an existing plan may make sense when it includes valuable guarantees that fit the saver's retirement plans. An attractive guaranteed annuity conversion factor is one example. Its financial value needs to be weighed against the additional investment options available through a new product.
A short period until payouts begin may also favour retaining existing guarantees. As the point when the money is needed approaches, unfavourable market movements can have a greater impact on the funds available. Additional return potential therefore needs to be considered alongside how much uncertainty in future benefits the saver can still accept.
The existing support arrangements may also remain more favourable in individual cases. Savers with low incomes and several children, in particular, may qualify for full Riester allowances with a relatively small personal contribution. Because the new system calculates support differently, comparing the maximum basic allowances is not enough. What matters is the total support available for the contribution the saver actually intends to make.
Conversely, existing guarantees do not automatically make the old plan the better option. Future costs and the remaining investment horizon also matter. Someone with many years until retirement who can withstand market fluctuations may view the opportunities of investing without a capital guarantee differently from someone who depends on a fixed minimum benefit.
The decision is therefore not limited to keeping a Riester plan unchanged or transferring everything. An existing plan may still be financially suitable while the new support system offers more favourable terms. Equally, a different support system cannot, by itself, compensate for a contract with unsuitable costs or risks. Government support and the quality of the contract need to be assessed separately.
Which decisions cannot be reversed?
Under German law, choosing the new support system for an existing Riester pension plan is irrevocable. Once savers have made this declaration to their provider, they cannot return to the previous rules for government allowances and tax relief. The decision therefore affects more than the allowance received in a single year.
The change also applies uniformly to the existing plans held by that allowance recipient. Savers cannot permanently retain the old support system for one of their plans while choosing the new system for another. The individual contract terms can nevertheless remain different.
The same principle applies when a saver takes out a new certified retirement savings contract after 31 December 2026. The new support system must then apply uniformly across their retirement savings contracts. This is particularly relevant when an existing Riester plan is kept without further contributions alongside a new Altersvorsorgedepot: The old plan remains in place, but it loses its protected status under the previous rules for allowances and tax relief.
Separate from this are the financial consequences of a transfer that may be difficult to reverse. An insurance-based plan that is given up may contain guarantees that are no longer available when taking out a new contract. Switching providers again does not automatically restore those earlier terms.
A subsequent provider switch generally remains possible within the new system. This flexibility should not be confused with a return to the previous support arrangements or the restoration of earlier guarantees. Three distinct issues remain: The choice of provider, the rules for government allowances and tax relief, and the benefits promised under the contract.
Conclusion: Look beyond the age of the plan
The Altersvorsorgedepot gives Riester savers more options, but it does not automatically replace an existing plan. Continuing the plan, changing only the support arrangements and transferring accumulated savings are different decisions, each with its own consequences.
The relevant factors are the support available in the individual case, future costs, existing guarantees and the remaining investment horizon. It is particularly important not to confuse the irrevocable choice of the new support system with the option to switch providers later. Whether keeping or switching a plan makes more sense depends on personal circumstances and contract terms, not on a blanket comparison of "old" and "new".
Further questions about the Altersvorsorgedepot
Before switching, savers need to look beyond existing guarantees and contract terms. Government support, investment options and retirement payouts also differ under the new system.
This article is provided for information purposes only. The legal and tax information contained herein is not intended to constitute or replace legal advice, nor does it purport to cover all legal or tax considerations that may be relevant to the subject matter of this article. The information is not exhaustive and does not take into account the individual circumstances of any particular investor or group of investors. It cannot replace advice from a tax adviser based on the circumstances of the individual case. Although the information has been compiled with due care, no representation, warranty or guarantee is given as to its accuracy, completeness or currency.