As of: January 23, 2024, 2:52 p.m
By: Romina Kunze
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For many people, the statutory pension is not enough.
Private provision is often required.
But which ones?
Only a few people still benefit from the Riester pension.
Wrongly.
Berlin – If the topic of “pensions” comes up during a conversation, young people in particular will probably wave it off in exasperation.
The prospects of a secure retirement do not seem rosy, even after decades of work, as numerous examples demonstrate.
The latest figures from the Federal Statistical Office suggest that millions of pensioners in Germany are close to the poverty line;
you have to get by on less than 1250 euros net.
In large cities such as Berlin, Munich or Hamburg it is a herculean task simply because of the high rents.
All the more reason to think about the day after tomorrow today so that you don't end up in old age poverty later on.
Families, younger people and low earners in particular can lay a foundation with a retirement provision that has actually been written off.
Better than its reputation: Expert clears up the bad image of the Riester pension
According to a YouGov survey from early summer 2023, around half of people in Germany are worried about poverty in old age.
Confidence in the statutory pension, but also in subsidized retirement provision, appears to have decreased.
An example: the Riester pension.
In recent years, the number of new Riester contracts has fallen steadily.
Too unprofitable, too inflexible - that's the criticism of the Riester pension.
Evil tongues recently declared them dead due to low interest rates.
Wrongfully so, as Klaus Morgenstern from the German Institute for Retirement Provision (DIA) believes.
State-sponsored retirement provision could promise security for the future, especially for low-income earners with many children, as he tells the
German Press Agency
.
Riester pension a discontinued model?
For whom state funding may be worthwhile
The Riester pension is possible for anyone who pays into the pension fund.
The state subsidizes Riester pension contracts with allowances and tax advantages.
Anyone who pays at least four percent of their pensionable income from the previous year will receive the full state allowance.
Since 2018 that has been 175 euros per year.
Possible allowances are deducted from the four percent of income.
The maximum amount for depositing is 2100 euros.
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Enjoying your retirement without a care in the world – that’s how everyone would like to imagine their retirement.
Unfortunately, the reality is very different for many people.
(Symbolic photo) © Imago
In addition, there are additional allowances for Riester savers with children - 185 euros per year for each child born before 2008, and from 2008 there are 300 euros.
“For couples of parents who are married to each other and do not live permanently apart from each other, the child allowance is automatically assigned to the mother,” the German Pension Fund informs on its homepage.
People under 25 who have just entered the world of work receive a one-off bonus of 200 euros when they take out a Riester pension.
Pension preview: Families with young children in particular benefit from the Riester
An example calculation shows that families with several children benefit most from the Riester subsidy - thanks to the high child allowances.
Assuming there is an annual income of 35,000 euros and one child born before 2008 and two after that, the monthly costs are within a manageable range.
According to the German pension insurance Riester calculator, that's just 37 euros.
The full subsidy is still available.
4 percent of 35,000 euros |
1400 euros |
Minus the basic allowance |
- 175 euros |
Minus the child allowance |
- 785 euros (185 euros + 300 euros + 300 euros) |
Minimum amount (annual) |
440 euros |
Minimum amount (monthly) |
36.67 euros |
But experts say the concept could also be worth considering for low-income earners without children.
After all, the “Riester pension was designed primarily for low earners so that they can afford retirement provision and receive additional support from the state,” as it says on the homepage.
Since 2005, the basic amount for the Riester pension has been 60 euros per year.
Anyone whose previous year's income is so low that it falls below 60 euros per year must pay a maximum of this basic amount in order to receive full state funding.
Riester pensions can be profitable – as long as someone still offers contracts
A Riester pension can still be profitable;
at least for some population groups.
Merten Larisch, an expert in retirement provision at the Bavarian Consumer Center, formulates a rule of thumb in response to a dpa request: “If your own contribution is not higher than a third of the amount paid in, it is worth it.”
The problem with Riestern, however, is that contracts can hardly be concluded anymore.
The few that still exist are often rather poor, says Larisch.
However, the Riester pension is likely to be reformed soon.
Experts then calculate new and better offers.
In any case, existing contracts should not be terminated, according to the advice.
(rku)