Germany's Bundesrat seeks changes to proposed early start pension

The German Bundesrat is demanding significant changes to the proposed ‘Frühstartrente’ (early start pension) legislation. The draft law aims to provide state-funded capital for children born from 2020 onwards to encourage early participation in capital markets for private retirement savings.

Under the current proposal, the state would contribute ten euros monthly into an individual, capital-funded retirement account for children aged six to 18 who attend educational institutions in Germany. While the state contribution is limited to one contract per child, the draft allows for additional private contributions of up to 6,840 euros annually per contract.

The Bundesrat has raised concerns regarding tax privileges, seeking to prevent parents or relatives from using multiple contracts to claim tax benefits on up to 13,680 euros in annual private contributions. The German Federal Government has expressed support for this amendment to ensure the policy focuses on its intended goal rather than becoming a tax advantage for high-volume private savings. The legislation remains a draft and has not yet been finalized.