Germany to Phase Out Riester Pension, Shift to Capital‑Based Savings

The German Bundestag approved a reform that will end the Riester pension scheme. No new Riiser contracts can be concluded after 1 January 2027, and the existing contracts will not be automatically terminated. Savers may keep their contracts, cancel them, or convert them to a new “private retirement depot” that invests in stocks, funds and ETFs without state subsidies. The reform aims to let citizens place their savings directly on capital markets, but it also removes the government’s financial support that underpinned the Riester system.

The pension commission, citing the shortcomings of Riester – high fees, complex guarantees and low returns – recommends a mandatory, capital‑based supplementary pension modeled on Sweden. Under the proposal, employees and employers would each contribute 2 % of gross wages to a publicly administered fund, without any guarantee of minimum payouts. The plan seeks to diversify retirement income and increase coverage of occupational pensions, which in Sweden protects nine out of ten workers.

Both proposals target the roughly 15 million German households currently holding Riester contracts, aiming to reshape retirement savings toward market‑linked investments while reducing state guarantees that have limited returns.