The state supports savers who take out a Riester pension by means of a basic allowance, a child allowance and, if applicable, a tax credit. through tax advantages.
In order for the allowances to be paid out in full, the owner of the Riester pension contract must pay in a fixed proportion of his or her previous year's income subject to social insurance contributions as a savings amount each year. The amount to be saved is currently 4%. From the start of the pension, the saver receives a monthly pension paid for life. The exact amount of regular pension payments depends in particular on the contributions paid in, the chosen form of investment and the amount of the state allowances.
All or part of the subsidized capital can be used to build or buy real estate and repay loans under the "Wohn-Riester" program. The prerequisite here is that the home is owner-occupied. With the exception of a 30% one-time payment upon retirement, the capital once paid in can only be withdrawn early if the government subsidy is largely repaid.
Since its introduction in 2002, more than 15 million Riester pension contracts have already been concluded in a wide range of investment variants.
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Who receives a Riester pension subsidy?
The state has defined in the law the group of persons entitled to the allowance. The target group is primarily salaried employees, since they must expect further declining claims from the statutory pension scheme. However, under certain circumstances, z. B. Self-employed individuals or homemakers take out a subsidized Riester pension contract.
The group of people entitled to allowances:
Eligible are all persons who are subject to compulsory insurance in the statutory pension insurance scheme. The unlimited tax liability in Germany required until 2009 is no longer a prerequisite. Cross-border commuters who live abroad but are subject to compulsory pension insurance in Germany can also receive support. [1]
Specifically, these include:
- Employees subject to pension insurance
- Those doing military or community service
- People receiving unemployment benefit I
- People on parental leave (up to 3. (age of the child)
- Self-employed persons insured in the artists' social insurance and other compulsorily insured self-employed persons
- Public sector employees and civil servants
- Persons with full reduction in earning capacity or. full disability
- Individuals who are voluntarily insured under the public pension system
- People in marginal employment (exception: waiver of exemption from insurance and top-up to full pension insurance contribution by the employee)
Not be directly eligible for a Riester pension subsidy:
- Self-employed persons without compulsory insurance in the statutory pension scheme
- Students (as long as they are not subject to pension insurance)
- Pensioners ("normal old-age pension")
- Persons with a pension due to partial reduction in earning capacity (without employment subject to pension insurance)
- Persons who are compulsorily insured in an occupational pension scheme (e.g., a pension fund) are eligible for the state allowance.B. doctors, lawyers, pharmacists)
No direct eligibility?
Tip: Direct eligibility already exists if the conditions for the group of persons entitled to the allowance have existed for at least a single day in the corresponding year!
All persons with a spouse who is entitled to a Riester subsidy can also take out a Riester pension. This is referred to as indirect or. indirect eligibility. Detailed information can be found in the section: "indirect eligibility". It would be possible, for example, for the wife of a self-employed person to take on a temporary job with the self-employed person that is subject to social insurance contributions, thereby acquiring an entitlement to a Riester pension subsidy. The self-employed person can then also receive a Riester pension as a spouse.
Indirect eligibility also applied to registered civil partnerships (ruling of the BVerfG 7.5.2013). With the introduction of same-sex marriage ("gay marriage") on 1. October 2017, corresponding spouses will have the same rights as all married couples anyway.
If you are not sure whether you are eligible for the allowance or have further questions, please contact us? Then simply request a free consultation on our site. The legal basis with all details can also be found in the Income Tax Act §10a.
How does the government Riester subsidy work?
Private pension provision is subsidized in two ways under the Riester pension: First and foremost, savers benefit from state allowances. In addition, the contributions made can be claimed as special expenses and thus bring tax advantages. The amount of the allowance depends on your personal situation.
The state allowance:
In order to receive the full allowance, at least 4% of the gross income subject to social insurance contributions in the previous year must be invested in the Riester pension contract. If less money is paid in, you will also receive the allowance only on a pro rata basis. The maximum subsidized amount is limited to 2.100 € / year limited.
However, the saver only has to pay in the difference between the state subsidies and the minimum contribution required based on his or her income. Regardless of income, however, investors must pay in at least the "base amount" of €60 per year themselves – even if the deduction of the allowance would result in a lower personal contribution.
1. Amount of the old-age provision allowance:
- For children born up to and including 31.12.For children born in 2007, the allowance is €185; for children born since 2008, the allowance is even €300.
- For married couples, the following applies: each spouse must take out a separate Riester contract.
Example calculation Riester subsidy (2008+):
- A married couple with two children born after 2007; only the man is employed; income 30.000 euros per year.
- The couple therefore has a total savings benefit of 1200 euros this year (= 4% of 30.000 €).
- Of this, the couple only has to actually pay in 292 euros themselves.*
- 908 euros the couple receives as allowance subsidy! (2 x € 154 basic allowance + 2 × € 300 child allowance).
- This corresponds to a subsidy of approx. 76%.
* 60 euros of which is paid since 2012 by the spouse who is only indirectly eligible (required base amount). Due to the increased personal contribution, the special expenses deduction increases by these 60 euros (if applicable. of importance for any tax reductions).
2. Tax benefits through the deduction of special expenses:
The pension contributions made, including allowances, can be deducted up to the maximum contribution of 2.100 euros can be claimed as special expenses. If the resulting tax savings are higher than the state allowance, the difference is refunded in the context of income tax ("Gunstigerprufung"). For married couples with only one working spouse and/or one or more children, tax effects generally do not play a role.
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What Riester pension investment vehicles exist?
Specifically, there are these different Riester pension investment options:
- Unit-linked Riester pension
- Riester fund savings plan
- Riester bank savings plan
- Classic Riester pension insurance
- Residential Riester
All options have their advantages and disadvantages. Which option is best for you depends largely on your personal situation and how high your risk tolerance is. But it is not only the selection of the appropriate Riester pension variant that is decisive. There are big differences between the offers of the individual providers.
Request a personal consultation, learn the details of each investment form: The different Riester investment forms. Or get an overview of the best Riester pension providers & Riester test winners per product.
What are the advantages of the Riester pension??
There are two decisive advantages of the Riester pension: the sometimes very high subsidy rates and the high degree of security offered by the state-subsidized pension, so that in many cases the disadvantages of the Riester pension are clearly outweighed by the advantages. In addition, you can use your Riester assets to finance owner-occupied housing, which can make the path to home ownership quite a bit easier.
Depending on your personal income and life situation, the state allowances under the Riester pension can reach a high to very high proportion of the total savings amount. For example, some savers receive over 70% of the savings amount as a state Riester subsidy. The respective provider then invests the deposited money according to the chosen form of investment (e.g.B. Riester funds) can be invested profitably until retirement. interest it.
In order to be called a Riester pension and to be eligible for the old-age pension allowance, the pension products of the various insurance providers must also meet certain requirements set by the state. Being bound by these certification criteria makes the Riester pension particularly secure.
This makes the Riester pension a secure retirement provision:
- Every provider is obliged to guarantee the insured person the availability of the entire amounts paid in, including all state allowances, as a monthly minimum pension at the start of the pension.
- Your Riester account cannot be seized.
- The saved pension assets are also not taken into account in the means test for unemployment benefit II – your Riester pension is therefore Hartz IV-proof.
Since 2008, it has also been possible under the German Home Owners' Pension Act ("Wohn-Riester") to use the subsidized Riester assets saved to purchase owner-occupied residential property. Either part of the capital (up to 75%) or all of the saved assets can be withdrawn for the immediate construction or purchase of a property. Alternatively, it is possible to use the Riester pension at retirement to repay real estate loans. The prerequisite in both cases is:
Since 2013, the provisions of the "Wohn-Riester" are even more attractive. Among other things, policyholders can now withdraw assets to finance owner-occupied property from their private pension plan at any time and benefit from lower taxation.
What are the disadvantages of the Riester pension?
Even though the advantages of the Riester pension outweigh the disadvantages for almost everyone eligible for subsidies, there are some conditions to consider – as with any pension plan – before you decide to take out a policy.
Here's what you should consider:
- There is no uniform regulation as to what happens in the event of the death of the insured person after the start of pension payments. Spouses and other surviving dependants only inherit something if the investment model allows or. it has been contractually agreed (in this case, it is advisable to agree on a pension guarantee period).
- The Riester pension is taxed in the payout phase, not in the savings phase ("downstream taxation"). As a rule, the income tax rate at retirement age (due to the lower income) is lower than the tax rate during working life.
- An annuity payment before the age of 62. (for contracts concluded before 2012 before the age of 60). Year of life) is not possible.
- Pension payments – like almost all other income in old age – are counted toward basic income support: If a Riester saver is dependent on basic state security in old age, this will therefore be reduced by the amount of the saved Riester pension (affects people with very low other reserves and pension entitlements).
In addition, you should be aware that the allowance portion and, if applicable. the granted tax advantages must be paid back, if a so-called harmful use is present. However, the Riester saver retains the personal contribution, as well as the (compound) interest income attributable to the subsidy share. The latter must be taxed as normal.