The Riester pension has been criticized for years. Now an alternative comes into play: the so-called early start pension. It should be easier, more flexible and more transparent.
• Early start-up pension should be more uncomplicated and digital
• Riester pension with higher funding
• Ten EUR ten euros in an individually led retirement pot
A new pension model with old strengths
The Federal Government plans to introduce a so-called early start pension in 2026. This is intended to answer the stagnating demand for Riester products and the growing importance of private pension.
With the early start pension, the insurance industry primarily wants to gain young adults through a capital-covered retirement provision. From the age of six, according to GDV, 10 euros per month should be paid into an old -age provision of every child who visits an educational institution in Germany. At the age of 18, the grant payments end and capital remains untouched up to the standard age limit.
Grant compared to the Riester pension
Nevertheless, a central point of criticism of the early start pension is the amount of the state subsidy. A total of only 120 euros per year, children receive twelve years, which results in just 1,440 euros when reaching the age of majority. From the GDV’s point of view, this amount is hardly suitable to develop a noticeable effect on the later pension. In the case of the Riester pension, which can be concluded from the age of 18, the basic allowance of the funding is 175 euros per year for childless. Anyone who has a child who was born from 2008 will receive 300 euros a year. However, the prerequisite for funding is the so-called minimum amount, which is 4 percent of the previous year’s gross income. This means that the Riester pension requires that the saver does its own contributions, which the early start pension does not require, but is seen by the GDV as a sensible option in order to build up useful pension.
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Rather, there should be the possibility that parents or grandparents from the age of six are allowed to deposit additionally – as well as the young adults from the start of their career as part of an annual maximum amount.
Less effort, more yield
While the classic Riester pension is struggling with elaborate bureaucracy and complicated allowance rules, the early start pension wants to make a lot easier and, above all, digital. There is also a big difference in the costs. While high final and administrative costs are partly incurred in the event of a Riester pension, the free choice of the deposit provider and the investment product, such as an ETF, can be saved significantly.
There is also a significant difference in terms of return: According to the ExtraEtF, an average return of up to six percent per year can be generated on the capital market with the children’s depot, with the Riester pension to drop an average of about half depending on the contract conditions. In addition, there is the advantage of the starting age of six years at the early start pension, whereby the capital can only start growing twelve years later in a Riester pension.
Editor finance.net