Germany launches new state-subsidized pension scheme in 2027
The new Altersvorsorge-Depot will replace the Riester pension, offering a state subsidy of up to 540 euros annually. The program is designed to incentivize private retirement savings through significant matching contributions and tax benefits.
Germany will introduce the Altersvorsorge-Depot, or AVD, on January 1, 2027, replacing the Riester pension as the third pillar of state-subsidized private retirement savings. The state provides a basic subsidy of up to 540 euros per person annually. This amount is calculated as a 50% match on the first 30 euros of monthly contributions, totaling 360 euros annually, plus a 25% match on the next 1,440 euros of annual contributions. To maximize the subsidy, individuals must contribute a total of 1,800 euros annually, or 150 euros per month. Additional incentives include a 200-euro bonus for young professionals under 25 and a child allowance that provides a 100% match on up to 300 euros of annual contributions per child. High earners in the 42% tax bracket can claim an additional 497 euros in tax deductions, reducing the net cost of the maximum contribution to approximately 108 euros. The program allows contributions starting from just 10 euros monthly. Existing Riester contracts can be transferred to the AVD under certain conditions, although early termination before 2027 requires the repayment of subsidies. The AVD is not mandatory but is presented as a significant financial incentive for private savings, with proponents describing it as a major reform for wealth accumulation.