2024-09-18 18:05:32
Following the Riester pension, a new retirement savings account is intended to offer citizens better return opportunities – including state subsidies and tax exemptions. This is well known.
If we take stock of the Riester pension a good 20 years after its introduction, financial experts agree: the Riester pension has failed to achieve its actual goal of strengthening private pension provision. Too inflexible, too expensive, too bureaucratic are the common criticisms. Read here why the Riester pension is a “disaster”.
If Finance Minister Christian Lindner has his way, this is exactly what will change. A new private pension plan is to be created, flexible, closer to the reality of life, less bureaucratic, more profitable: a subsidised Retirement savings account without guaranteeThe idea is to enable more promising investments in the capital market with higher returns.
Last week, further details about this retirement savings account were announced. Christian Lindner spoke to a select group at Berlin’s Paul Löbe House on Wednesday. The draft law has not yet been voted on in the Bundestag, but it is expected to happen soon. Let’s take a look at what is already known.
The new retirement savings account is scheduled to launch on January 1, 2026. As things stand, citizens will then be able to choose between a new Riester pension and the retirement savings account. If the FDP has its way, self-employed people and freelancers will also be able to use the new pension plan.
In comparison to insurance investments such as the Riester pension, the retirement savings account has no security guarantee on the capital paid in. Instead, the money can be invested long-term and widely diversified on the stock market – and thus offers the chance of higher returns. One could say that for the first time there will be an ETF savings plan, tax-privileged and subsidized.
Anyone who decides to open a depot should be able to freely choose what they want to invest in: individual stocks, funds or even ETFs are conceivable. Savers can invest monthly, as with a savings plan, or buy securities once. According to Lindner, there should be a positive list of investments that are eligible. Risky leveraged products (derivatives) and crypto investments are excluded.
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According to Lindner, every euro of equity capital should be subsidised with 20 cents from the federal government, but capped at 3,000 euros per year. This corresponds to 600 Euro allowance per deposit holder. For children, there will be a basic allowance and a child allowance, which the federal government will subsidize with 25 cents per euro paid in, up to a personal contribution of 1,200 euros per year.
Anyone who wants to benefit from state support should at least 120 euros per year have to pay into their retirement savings account. Newcomers to the workforce will receive a supplementary payment of up to 200 euros, which will be paid over three years. Earners with an income of less than 26,250 euros could also benefit from a bonus of 175 euros.
Unlike Riester, the retirement savings account is intended to be unbureaucratic. However, it is not yet known exactly how the allowance management will look in the future. As t-online learned upon inquiry, it is conceivable that savers will be able to deduct both their own contribution and the allowances from their taxes as special expenses.
In order to give savers a quick overview of which retirement savings accounts are available and under what conditions, a Comparison platform The providers of the certified deposits – these are likely to be banks, but also so-called neo-brokers – should provide the data for this.
It is also planned that savers will be able to compare different investment options. Lindner even spoke of a reference portfolio, possibly created by a professional manager, that pension savers could use as a guide. It should be possible to switch from one pension portfolio to another.
During the term of the retirement savings account, no capital gains tax of 25 percent will be charged on profits from the sale of securities. However, the money must remain in the account; savers cannot withdraw it beforehand.
According to the Ministry of Finance’s plans, you will be able to withdraw money from your portfolio and receive a pension at the earliest at age 65 – i.e. three or five years later than with the current Riester pension. You will then pay tax on the pension at your personal tax rate, which is generally lower as a pensioner than during your working life.
The discussion is that savers do not have to withdraw their money at 65, but can wait to withdraw it. This would allow them to extend the accumulation of capital. The new insurance solution and the pension portfolio should mean that when retirement begins, there is a choice between a lifelong pension or a withdrawal plan that lasts until the age of 85.