Bundestag Passes Major Pension Reform: New Savings Depot to Replace Riester

The German Bundestag passed a sweeping reform of private retirement provision on March 27, 2026, replacing the long-criticized Riester pension with a new "retirement savings depot" system set to launch on January 1, 2027. The reform, backed by the governing CDU/CSU and SPD coalition under Chancellor Friedrich Merz, abandons the mandatory contribution guarantee that had long constrained investment returns under the old system. Federal Finance Minister Lars Klingbeil and Union parliamentary group leader Jens Spahn both expressed support for the overhaul, though reactions from opposition parties and industry groups were mixed. The legislation marks the most significant restructuring of Germany's private pension landscape since the Riester system was introduced more than two decades ago.

New depot trades guarantees for capital market returns The central change in the reform is the removal of the requirement that providers guarantee the return of all contributions and allowances at the start of retirement, a rule that had made meaningful capital market investment effectively impossible under the old Riester framework. Under the new system, savers will be able to place money in a retirement savings depot invested in equity funds and ETFs, accepting market risk in exchange for higher potential returns. Safety-oriented savers will still have access to guarantee products covering 80 or 100 percent of contributions and allowances, according to reporting by Tagesschau. A publicly organized standard depot will also be introduced, with annual effective costs capped at 1.0 percent — down from the previous ceiling of 1.5 percent, according to Tagesschau — to put competitive pressure on private financial institutions. Acquisition costs will be spread over the contract term, switching providers will be made easier, and payout plans running until at least age 85 will be permitted alongside lifelong pensions. The reform also extends eligibility for state-subsidized private provision to self-employed individuals, a group previously excluded from the Riester system.

Private retirement provision cost cap reform: Effective cost ceiling (before: 1.5% per year, after: 1.0% per year); New Riester contracts (before: Available, after: No new contracts from January 1, 2027); Contribution guarantee (before: Mandatory (100% of contributions), after: Optional — guarantee or market-linked products); Self-employed eligibility (before: Excluded, after: Included)

Riester's decline made reform politically unavoidable The Riester pension was introduced in 2002 under the red-green government of Chancellor Gerhard Schröder as a response to cuts in the statutory pension level, with the goal of enabling low earners, young workers, and families to build supplementary retirement savings through state allowances and tax advantages. The number of Riester contracts grew rapidly after the system's launch and reached its peak at the end of 2017 with over 16.6 million contracts, according to government figures cited in source articles. Since 2018, the number has declined steadily, falling to just under 15 million contracts by the end of 2024. Up to a quarter of existing contracts are no longer being actively contributed to, according to Tagesschau. The system drew sustained criticism for high administrative costs, weak returns, and a complex subsidy structure that benefited providers more than savers.

The political urgency of reform was underscored by the scale of Riester's reach across Germany, particularly in Bavaria. According to Bayerischer Rundfunk, 14% (of residents) — share of Bavarians with a Riester contract in 2022 of people in Bavaria held a Riester contract in the contribution year 2022, compared to a national average of 12 percent — representing approximately 1.89 million contracts in the state alone and 9.67 million nationwide. The Greens abstained in the Bundestag vote, praising the decision to create a public standard depot but criticizing the coalition's reliance on savers taking active steps to enroll, arguing that many people would again be left out. The Left party voted against the reform outright. The AfD also abstained.

2017: 16.6, 2024: 15.0

Unions warn of no guaranteed benefits, employers call reform too timid Reactions from organized labor and business groups highlighted the tensions the reform failed to resolve. „The new offer creates no secure old-age provision, but a new labyrinth of offers that are subsidized, but nonetheless financed one-sidedly by employees without guaranteed benefits” — IG Metall via stern.de The BDA employers' association acknowledged a small step forward but said the reform remained "behind the necessities," arguing that the planned support measures would not allow the federal government to meet its stated retirement provision goals, according to Stern. Consumer advocates took a more positive view: Ramona Pop, board member of the Federation of German Consumer Organizations, called the reform a "milestone" and praised the planned standard product in particular, according to Bayerischer Rundfunk. The Federal Association of German Cooperative Banks welcomed stronger promotion for families, low earners, and self-employed people but criticized the public standard depot as an unwanted intervention in market competition — a position also taken by the German Insurance Association, which described the state's dual role as both rule-setter and market participant as problematic. Federal Finance Minister Lars Klingbeil described the reform as a step toward a "more affordable, simpler and less bureaucratic" retirement provision, while Jens Spahn said he expected more flexibility and better return opportunities for savers. Existing Riester contracts will retain grandfathering protection and can continue under current terms, but no new Riester contracts may be concluded from January 1, 2027 onward.