German government finalises 'Frühstartrente' plan: €10 monthly state contribution to child pension accounts from age six

The plan

Finance Minister Lars Klingbeil (SPD) has sent the draft law for a 'Frühstartrente' into inter-ministerial coordination, four weeks after the government's pension commission presented its broader reform concept. The scheme, agreed in the coalition treaty between the CDU/CSU and SPD, will see the state pay €10 per month into a capital-funded retirement account for every eligible child from age six until they turn 18. The system launches with the 2020 birth cohort, retroactively from 1 January 2026, and will add the next cohort of six-year-olds each subsequent year.

This inequality often continues into old age. We want to change that.

Klingbeil told the Funke Mediengruppe that early retirement provision today frequently depends on parents' income or wealth, and that the Frühstartrente is designed to deliver 'more equal opportunities.' The draft law explicitly frames the long investment horizon, spanning more than six decades, as a way to turn even modest annual contributions of €120 into a meaningful supplementary pension.

How it works

Parents can open a certified savings account with a private provider of their choice. If they do not, the money is invested collectively on the capital market, and the beneficiary can later transfer the claim into an individual account. Additional parental contributions are permitted up to €6,840 per year. All earnings remain tax-free until payout, which cannot begin before the account holder reaches age 65. After turning 18, the accumulated capital can be moved into another certified retirement savings vehicle.

Older minors, those born before 2020, can open similar accounts but will receive no state subsidy. The draft no longer contains a catch-up provision for older cohorts that had been floated earlier, when the coalition had suggested that from 2029 previously excluded year groups might be brought in retroactively.

Cost and projections

The federal government expects to spend €198 million on the programme in its first year, with the annual cost climbing to €411 million by 2030 as more cohorts enter the system. The finance ministry has published illustrative projections showing how the accounts could grow depending on parental top-ups. With only the state's €10 monthly contribution, the account would be worth roughly €2,200 at age 18 and around €53,000 by age 65. If parents add €10 per month, those figures rise to €4,400 at 18 and €107,000 at 65. A €50 monthly parental top-up would produce a depot worth approximately €320,000 by retirement age.

Broader pension reform context

The Frühstartrente is the third pillar of the government's push to strengthen capital-funded retirement provision. The pension commission's package also includes a contribution-financed capital pension for all employees, and earlier this year the coalition already passed a restructuring of the state-subsidised private pension known as the Riester-Rente. Social Minister Bärbel Bas (SPD) is preparing a larger pension reform based on the commission's proposals.

Financial literacy goal

The draft law also aims to improve financial competence. The ministry says young people should experience the performance of their personal accounts 'directly and tangibly,' and the text speaks of 'early practical capital-market experience' for children together with their parents. Providers and public bodies will be required to offer regular, clear information so that families can track how the assets develop and understand the role of capital-market mechanisms in private retirement saving. The hope is that this will create incentives to continue private provision into adulthood with the individual's own contributions.