Riester Nachfolge: The Childless Saver’s Dilemma

The Pension Reform That Favors Families

The core of the Altersvorsorgereformgesetz replaces the old Riester-Rente with a more flexible system. Instead of the rigid €175 basic allowance, the new model offers 30 cents per euro contributed on the first €1,200 annually, plus 20 cents per euro on the next €600. That caps at €480 in state money per year, nearly triple the old allowance.

Sounds generous. Until you read the fine print.

Families with children receive additional supplements of up to €300 per child. A married couple with two kids could potentially rake in over €1,000 in annual subsidies while contributing the same amount as a childless single. The system explicitly rewards procreation, leaving childless professionals, often higher earners who pay substantial taxes, subsidizing others’ retirement while getting minimal direct benefit.

The Tax Deferral Trap

Proponents argue the real magic isn’t the subsidies, it’s the tax deferral. Contributions reduce your taxable income today, and earnings compound tax-free for decades. Many international residents plan to use this feature, betting that future tax rates remain unknown.

But here’s the catch: withdrawals during retirement get taxed as regular income. If you’re a childless professional now in a 42% marginal tax bracket, you’re deferring taxes at a high rate only to potentially pay the same, or higher, rate later. The German tax system doesn’t offer the favorable capital gains treatment many other countries do. That 30% state bonus might simply prepay your future tax bill.

Financial experts from n-tv’s analysis note that if fees exceed 1.5% annually, the math collapses entirely. A typical ETF Sparplan costs 0.2% or less. Even with the state subsidy, high product costs erode decades of compounding.

Fee Structures That Punish the Prudent

The legislation caps costs for standard products at 1.5% effective annual fees. That sounds protective, until you realize it’s still seven times more expensive than a self-managed ETF portfolio at a Neobroker.

Industry commentary from DAS INVESTMENT reveals that insurance lobbyists fought hard against this cap, arguing it would “endanger advice quality.” Translation: they want to keep charging high fees for products that primarily benefit their bottom line.

Childless savers, who typically have higher incomes and more investment knowledge, particularly feel this sting. They know they could build an identical portfolio for a fraction of the cost, making the state subsidy feel like a rebate on an overpriced product rather than genuine support.

When It Actually Makes Sense (Spoiler: Rarely)

The math only works in specific scenarios:

• Case 1: True Low-Income Saver
  If you earn under €30,000 annually and can only contribute €50 monthly, the 30% subsidy represents meaningful help. But even then, a basic ETF Sparplan without restrictions might outperform over 30 years.
• Case 2: The Tax Arbitrage Play
  If you’re currently in the 45% top tax bracket but expect to drop to 25% in retirement, deferring taxes creates real value. However, most childless professionals remain in high brackets throughout their careers.
• Case 3: The “I Won’t Manage It Myself” Crowd
  Some people need the forced discipline of a formal pension contract. If you’d otherwise spend the money, the psychological benefit outweighs mathematical disadvantages.

For everyone else, especially tech-savvy expats comfortable with modern brokerage platforms, the restrictions outweigh benefits.

The Flexibility Mirage

The reform promises new withdrawal options: instead of mandatory lifetime annuities, you can choose phased withdrawals until age 85, leaving remaining capital inheritable. This addresses one major Riester criticism.

Yet restrictions remain. You can’t access funds before age 62 without severe penalties. Emergency withdrawals remain impossible. Your money stays locked for decades, while a normal brokerage account offers complete flexibility.

Sparkasse’s analysis highlights that existing Riester contracts can be switched to the new system without losing accumulated subsidies. But they advise caution: “Don’t rush to cancel old contracts. Pausing contributions often makes more sense.”

The Childless Alternative: Build Your Own

Here’s what the numbers actually say for a childless 35-year-old planning to retire at 67:

Over 32 years, Option B yields roughly 60% more spendable wealth. The state subsidy simply cannot compensate for higher fees and less favorable tax treatment.

What the Government Won’t Tell You

The reform’s primary goal isn’t maximizing your retirement wealth, it’s increasing domestic investment in German financial markets and encouraging higher birth rates. You’re a pawn in a demographic policy game.

The Bürger & Geld analysis correctly identifies that “households with low savings contributions will receive significantly less support in the future.” Childless households, statistically higher-earning but with different priorities, fall into this gap.

Action Plan for Childless Savers

Before 2027:

• Don’t open a new Riester contract unless you’re a low-income earner who benefits from the old system’s calculation methods.
• If you have an existing contract, pause contributions rather than canceling to avoid clawback of subsidies.
• Max out your other tax-advantaged options first: employer pension plans (bAV) often offer better terms.

After 2027:

• Wait for concrete product details before deciding. Neobrokers like Trade Republic or Scalable Capital will likely offer competitive products under the new framework.
• Calculate your personal tax arbitrage: Use the official BMF calculators when available.
• Consider a hybrid approach: Take the minimum €120 annual contribution to qualify for basic subsidies, but invest the bulk of your retirement savings independently.

The Verdict

For childless savers, the Riester-Nachfolge represents a classic German compromise: well-intentioned but over-engineered. The subsidy looks substantial on paper but disappears when you account for higher fees, less favorable tax treatment, and decades of lost flexibility.

The only scenario where it clearly makes sense is for lower-income earners who genuinely couldn’t save otherwise. For educated, disciplined investors without children, a simple ETF Sparplan remains mathematically superior.

The real story here isn’t about retirement savings, it’s about how German social policy continues to privilege traditional family structures, using the tax code to nudge behavior. Childless professionals aren’t just subsidizing their own future taxes, they’re subsidizing other people’s children and the administrative overhead of a complex system that doesn’t serve their interests.

Your best pension strategy? Keep it simple, keep costs low, and keep your options open. The state subsidy is a distraction from what actually builds wealth: consistent investing in low-cost instruments you control completely.