Germany's Altersvorsorgedepot: Government Allowances and Eligibility Explained

Saving privately for retirement is not just about how much you set aside yourself. Government allowances can also help build retirement savings. It is important to understand which amounts are paid into the retirement savings contract and which conditions must be met to qualify for support.

For Germany's Altersvorsorgedepot, a retirement investment account that providers can offer from 1 January 2027, the basic allowance depends on the amount of the saver's own contributions. Child allowances and a one-off bonus for young savers may also be available. Depending on individual circumstances, savers may also qualify for tax benefits. Their individual tax implications are outside the scope of this article.

The rules below describe the new support system. Transitional rules apply to existing Riester pension plans; the launch of the Altersvorsorgedepot does not automatically change their government support arrangements.

This article answers four key questions:

• How is government support for the Altersvorsorgedepot calculated?
• Who is eligible for Altersvorsorgedepot support?
• How much are the child allowance and the bonus for young savers?
• How do you apply for support, and what do you need to consider?

Under the new system, directly eligible savers can receive a basic allowance of up to EUR 540 for an annual personal contribution of EUR 1,800. The calculation is based on the contribution actually paid. The previous income-based calculation of the minimum personal contribution needed for the full Riester allowance does not apply under the new support system.

The basic allowance is calculated in two tiers.

• The first EUR 360 of personal contributions receives a 50% government top-up, providing up to EUR 180.
• Contributions above EUR 360 and up to EUR 1,800 receive a 25% top-up. This means the next EUR 1,440 can generate up to EUR 360 in basic allowance.

Together, the two tiers provide a maximum basic allowance of EUR 540. A minimum personal contribution of EUR 120 a year is required. This is equivalent to EUR 10 a month, but it is the annual total that matters. Anyone paying less receives neither the basic allowance nor a child allowance. At a personal contribution of exactly EUR 120, the regular basic allowance for directly eligible savers is EUR 60.

The limit for government support is separate from the amount that can be paid into the contract. Savers may make personal contributions of up to EUR 6,840 per certified retirement savings contract each year. Government allowances do not count towards this limit. However, personal contributions above EUR 1,800 do not increase the basic allowance.

This tiered structure provides proportionally greater support for smaller personal contributions: The first portion receives a higher top-up rate than the next. This rate is not an investment return. It measures the government's contribution to the amount paid in, not the performance of the assets held in the account. Even with government allowances, an Altersvorsorgedepot remains an investment that can lose value.

Savers are directly eligible when they meet the statutory requirements through their own employment or personal circumstances. This includes, in particular:

• People covered by compulsory statutory pension insurance in Germany, such as employees who are required to pay into the scheme.
• Certain groups given equivalent status under German law, including civil servants, judges, members of the armed forces and people with compulsory coverage under the farmers' pension scheme.
• Subject to further conditions, people receiving certain benefits for reduced earning capacity or incapacity for service.

Eligibility is also being extended to certain self-employed people. To qualify under this additional route, they must:

• Be under 67.
• Earn business income or income from self-employment covered by the relevant legislation during the contribution year.
• Have filed a tax return for that contribution year.

A job title alone therefore does not establish eligibility.

A further provision covers employees who are required to belong to a professional pension scheme in Germany. They must also be under 67. In addition, they must:

• Receive employment income.
• Have paid a contribution to the professional pension scheme.
• Have given timely consent to the required transfer of data. This consent must be in place no later than the end of the contribution year.

Indirect eligibility for allowances may also arise through a spouse. When only one partner is directly eligible, the other may qualify for allowances subject to certain conditions. Among other requirements:

• The indirectly eligible partner must have their own retirement savings contract.
• They must pay in at least EUR 120 a year.
• The spouses must not be permanently separated. The same rules apply to registered civil partnerships.
• The payout phase of the relevant contract must not have begun.

The maximum basic allowance of EUR 540 does not apply to indirectly eligible savers. Their basic allowance is capped at EUR 175 a year and is calculated using the subsidised contributions of the directly eligible partner. Paying the minimum personal contribution therefore does not automatically entitle them to the maximum allowance.

The child allowance under the new system is up to EUR 300 per child per year. Eligibility generally requires the person claiming the allowance to have been awarded German child benefit (Kindergeld) for the child concerned. For directly eligible savers, the child allowance equals 100% of the qualifying personal contribution, capped at EUR 300 per child. The minimum annual personal contribution of EUR 120 must also be met.

The full child allowance is therefore available with an annual personal contribution of EUR 300. Having more than one eligible child does not require a higher contribution: With two eligible children, the same personal contribution can generate a child allowance of EUR 300 for each. Contributions between EUR 120 and EUR 300 result in a correspondingly lower child allowance.

For example, a directly eligible parent contributes EUR 300 a year and meets the child allowance requirements for two children. This produces a basic allowance of EUR 150 and total child allowances of EUR 600. Including the parent's own contribution, EUR 1,050 is paid into the contract. This is the combined amount of contributions and allowances, not a statement about the account's future value.

Where the child allowance is payable to an indirectly eligible spouse, however, it is calculated using the subsidised contributions of the directly eligible partner. This distinction matters when contributions are distributed differently within a family.

Young savers who are directly eligible can also receive a one-off bonus of EUR 200, known as the Berufseinsteigerbonus. They must be under 25 at the start of the contribution year. The minimum personal contribution of EUR 120 must also be met. This is a one-off bonus, not an annual allowance.

Applications for allowances are generally made through the provider. The deadline is the end of the second calendar year following the contribution year. An application for contributions made in 2027 would therefore need to be submitted by 31 December 2029. Savers can also authorise the provider to apply for allowances on their behalf for each future contribution year.

Germany's central allowances office (Zentrale Zulagenstelle) then determines entitlement and arranges payment to the provider, which credits the allowance to the retirement savings contract.

Even with a standing authorisation, the information supplied must be kept up to date. Savers must notify the provider without delay of any changes that reduce or remove their entitlement. These may include changes in the circumstances relating to children or spouses. An automatic application does not remove the need to check that the personal eligibility requirements are still met.

It is particularly important to distinguish between the application deadline and the eligibility requirements. The two-year application period does not mean that all qualifying conditions can be met at a later date. Any legally required consent to data transmission must be in place on time. For newly eligible self-employed people, having filed a tax return for the relevant contribution year is also an eligibility requirement.

Having multiple contracts does not multiply the support available. Directly eligible savers may split their allowance between no more than two contracts; the support limits do not apply separately to each contract. Indirectly eligible savers, by contrast, cannot split their allowance across multiple retirement savings contracts.

Later withdrawals can also affect the support received. Where subsidised capital is used outside the circumstances permitted by German law, some or all of the support received may have to be repaid. Government support therefore remains tied to the purpose of retirement saving.

Government support for the Altersvorsorgedepot is based primarily on contribution-linked allowances. Other benefits may be available depending on individual circumstances. The amount of support depends in particular on personal contributions, eligibility and family circumstances.

It is therefore important to distinguish between personal contributions and government allowances. A high government top-up rate does not, by itself, establish whether an Altersvorsorgedepot suits an individual's circumstances. Costs, capital market risks, the investment horizon and the requirement to keep the money set aside for retirement remain separate factors in the decision.

Government support is only one part of the picture. The underlying investments, existing retirement savings contracts and how savings are eventually paid out also shape how an Altersvorsorgedepot can be structured.

• How does the Altersvorsorgedepot work?
• Which ETFs and funds can you hold in an Altersvorsorgedepot?
• Should you keep your Riester pension plan or switch to an Altersvorsorgedepot?
• How does an Altersvorsorgedepot pay out in retirement?

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.