Riester answers to your questions about the riester pension

There are more letters about Riester than about any other topic. The Stiftung Warentest answers frequent and interesting questions from readers.

Riester in detail: taxation, divorce, termination

  • What’s with the nonsensical regrouping?
  • Can I still rely on a pension commitment from 2005??
  • What happens if my Riester provider goes bankrupt??
  • Is a Riester contract worthwhile at all now??
  • Is Riester even an option for savers over 45??
  • Riester as self-employed with child?
  • Acquisition costs repeated every year?
  • Are costs justified in the event of premium changes?
  • May others save for me?
  • Where do I turn if I have problems with my Riester contract??
  • Can I correct incorrect contribution payments??
  • Does nursing care allowance count as income subject to social insurance when Riester pension plans are used??
  • Is sick pay relevant for calculating your own contribution??
  • May the allowance office reclaim money after termination??
  • Why is the allowance reduced despite correct personal contribution??
  • What applies if I want to use Riester to reduce the debt on my residential property??
  • How can I use Riester to finance my own home?
  • As a housewife I pay the minimum contribution. Why are the allowances reduced??
  • What happens with the promotion of my wife, if I am in pension?
  • My husband is on parental leave. May pay in more than the pure allowances?
  • What happens to Riester contracts in the event of divorce??
  • What is the cost of splitting the contract?
  • Can I continue to make savings on a split Riester contract??
  • Can I transfer the Riester capital after pension equalization??
  • Does the guarantee apply if the contract is in the red at the time of the divorce??
  • What does the marital portion refer to??
  • What is the marital portion if the contract is in the red??
  • Which contract conditions apply after a divorce??
  • Can I have the transferred Riester entitlement paid out directly??
  • How is the Riester pension taxed after a pension settlement?
  • What role does eligibility play in pension equalization??
  • Can housewives and househusbands continue to save for their pension after divorce??
  • What happens to Riester child allowances in the event of divorce??
  • Do I have to live forever, so that the Riestern was worthwhile at all?
  • Loss of support despite pension guarantee?
  • Is the allowed capital payout 20 or 30 percent??
  • What is the difference between subsidized and unsubsidized capital??
  • Are there good offers for the payout phase?
  • Do I have to pay final withholding tax on my Riester fund savings plan??

Doubts about old-age provision with Riester

What are the nonsensical reallocations?

Riester fund savings plans have little in common with ordinary equity fund savings plans, but are similar to pension insurance policies due to the guarantee and lifelong payout in old age. With Riester fund savings plans, savers have little influence on how the provider divides the Riester capital between higher-yielding but riskier equity funds and safe pension funds.

Providers often sell equity funds during stock market crises and switch to safe pension funds or interest-bearing investments. You would like to fulfill the guarantee of the Riester contracts, i.e. make sure that at the beginning of the pension all payments and allowances are completely received in order to guarantee a life-long payout.

Can I still rely on a pension commitment from 2005??

Yes, you can. With a classic Riester pension insurance, you already know when you sign the contract how high the pension commitment is, i.e. how much pension you will receive later as a minimum. This benefit is secure.

When you took out your contract in 2005, the guaranteed interest rate was still 2.75 percent. This interest on the savings portion of your contribution is guaranteed for the entire term of the contract. If you were to take out a new contract elsewhere, you would only receive 0.9 percent guaranteed interest on the savings portion.

Hold on to your contract. In addition to the guaranteed interest rate, the insurer will give you a share of the surplus. However, the amount is uncertain. What the insurer announced to you when you signed the contract is not binding and is now significantly lower than originally promised.

What happens if my Riester provider goes bankrupt??

Your pension assets are protected. Insurers have a security system for their customers: Protektor Lebensversicherungs-AG. It continues pension insurance policies of companies in financial distress. The customers of bankrupt companies at least receive the guarantee benefits. If a provider of fund savings plans goes bankrupt, the fund assets are not part of the bankruptcy estate, but the investors are entitled to them.

For the credit balance in bank savings plans of the savings banks, the liability association of the savings banks is liable, in the case of a cooperative bank, the security institution of the Federal Association of German Volks- and Raiffeisen banks is liable.

For whom Riester is worthwhile

Is a Riester contract worth it at all now??

In the current low-interest phase, it is worth taking out a contract if the state finances the majority of the contributions. You get a basic allowance of 175 euros a year. For each child born after 2008, there is an additional 300 euros per year (185 euros for children born before 2008). On top of that, depending on your income, there are also tax advantages. A househusband with three small children and a mini-job would receive a state allowance of 1,075 euros for an annual contribution of 60 euros. The money is practically a gift. When you retire, you will be in the black as soon as the payout phase begins – in other words, you will receive money that you have not paid in.

The situation is different if you contribute significantly more to capital accumulation due to a higher income. In the payout phase, it can take 20 years or more, depending on the contract, until your investment has paid off. If you want to invest in your own apartment or house later, Riester home savings contracts are a way to escape the pension corset in the payout phase. Or make provisions for the time being without a subsidy – for example, with the slipper savings plan, an investment strategy developed by Finanztest. However, politicians are also currently revising the Riester model. Maybe it will become more attractive.

Is Riester even an option for savers over 45??

There are more and more providers who do not accept older customers. Since you have to guarantee the paid-in capital at the end of the contract term, many providers calculate with minimum terms, maximum entry age or minimum contributions. Customers over a certain age can then no longer meet these requirements. You should ask several providers, because the conditions are not the same everywhere.

If you no longer receive a contract, there is not much you can do about it. Although it seems discriminatory and questionable from a socio-political point of view if people over a certain age are deprived of the opportunity to make provisions for their old age with state support, Riester is intended to compensate for the declining pension level. However, in response to a question from Finanztest, the Federal Ministry of Justice points out that different treatment on the basis of age is permissible under certain conditions and does not violate the General Equal Treatment Act. These include the risk calculation of Riester contracts.

Riester as a self-employed person with a child?

Yes, it is possible. During the first three years of your child’s life, you are automatically covered by the statutory pension insurance and are credited with pension points, even if you do not pay anything in yourself. As a compulsorily insured person, you automatically have an immediate Riester claim. However, this entitlement to subsidies expires after three years when the compulsory insurance ends.

Whether it is worthwhile to conclude a contract for three years of support is questionable. Unless you are able to contribute to the pension scheme via a spouse who contributes to the pension scheme. If you have more children or change to a job that is subject to social insurance contributions at a later date, it is more worthwhile to take out the policy.

Not all costs are legal

Each year again conclusion costs?

Only if you have chosen a dynamic contract form, in which the contribution increases automatically every year, there are proportional costs for the additional contribution each time as at the conclusion of the contract – it is a mini-new contract. The five-year period over which the provider must at least spread the costs also begins anew for the increase amount. We advise against such contracts.

Seek advice from a consumer advice center on whether it makes sense to cancel the dynamic or change the contract. If, on the other hand, your provider charges you a new acquisition cost when you change your premium in order to take advantage of the full subsidy, you should defend yourself (see next question).

Are costs justified in the case of contribution changes?

No. In recent years, many Riester insurers have unjustly charged their customers multiple acquisition and sales costs in the event of premium changes due to allowances. This can quickly amount to several hundred to well over a thousand euros. Riester savers with children were affected particularly often.

If you receive child allowances, you can reduce the savings rate by the amount of the allowance and still receive the full subsidy. Savers whose income increases, on the other hand, must pay in more to take advantage of the full subsidy. For this, the savings rate including allowances must correspond to 4 percent of the income subject to social insurance contributions.

The Federal Financial Supervisory Authority (BaFin) clarified at the end of 2019 that costs for such premium changes are illegal. However, insurers are not required to identify and compensate all customers without being asked to do so. The customers must become active themselves. Often, however, it is not possible to determine on the basis of the contract documents whether they have been collected more than once.

Use the sample letter from the consumer advice center in Hamburg to ask your insurer to review your contract and the acquisition and sales costs charged. Only pension insurance policies are affected, but not Riester allowances for subsidized bank and fund savings plans.

Independent. Objective. Incorruptibly.

Allowances, tax benefits, contract – what rules apply

May others save for me?

No. Ask the siblings to give you money in the amount of the contributions and transfer it to your bank account. You then pay it into your Riester contract. In order to be able to claim allowances and tax relief, you must have previously incurred expenses for old-age provision and paid your own contributions into an old-age provision contract that is in your name.

Where do I turn if I have problems with my Riester contract??

In the case of complaints, objections and follow-up questions, you must make sure that you choose the right addressee. Different offices are responsible for different complaints:

Complaint to provider and allowance office. Customers who disagree with the amount of their allowance in the status notification sent to them first address their complaint to the provider of their Riester contract. The latter forwards it to the Central Allowance Office for Old-Age Assets. The authority then finally determines the allowance in a notice for a given year. Savers can appeal against this decision to the allowance office.

Insurance and bank ombudsmen. You can complain to the ombudsmen, for example, if your provider has not forwarded the customer data to the allowance office correctly and on time, or if the provider has not correctly calculated the savings contribution for the full allowance when the contract was concluded. The ombudsmen do not review the procedure and the result of the allowance office. They mediate however between customers and offerers and can an arbitrator sentence fall, to which the offerers mostly keep. The processing of the complaint is free of charge. Depending on the Riester contract, contact the ombudsmen for insurers, banks, building societies and fund companies. The Federal Ministry of Justice has compiled a list of conciliation boards.

Complaint with the financial supervision. In case of trouble with the provider, customers can also turn to the Federal Financial Supervisory Authority (Bafin). The authority intervenes in its function as a supervisory authority, if banks or insurance companies violate laws and supervisory rules. However, it cannot make an arbitrator’s decision like an ombudsman.

Can I correct incorrect premium payments?

No. The legislator does not permit that. If your salary increases, you must always make sure to adjust your contribution by the end of the following year at the latest. For the full subsidy, your contribution, including allowances, must be as high as 4 percent of your previous year’s gross income. So in 2021, what matters is what you earned in 2020.

Childless people who want to be sure and can afford it simply always pay in 1,925 euros a year. This is the maximum subsidy (2,100 euros) minus the basic subsidy (175 euros). Then income fluctuations no longer play a role. If you receive child allowances, your personal contribution is reduced accordingly.

Does the care allowance count as income subject to social insurance when Riester is used??

No. The care money paid by the care cash does not count with the computation of the height of the own contribution with. In order to take full advantage of the Riester subsidy, 4 percent of the income subject to social insurance contributions must be paid into the contract each year, but at least 60 euros must be paid into the contract. The care money remains thereby however outside before. If you have no other income subject to social security contributions, you only have to pay 60 euros a year to receive the full subsidy.

Still, watch out: The allowance office checks whether savers are transferring the correct personal contribution. The statutory pension insurance company reports your income to this office. But the allowance office does not recognize that it is a care allowance. This must be stated in your application for a Riester allowance. Under -section E, item a, do not name the care allowance as "actual pay". If it is your only income, enter 0 euros there. Then the allowance office does not include the care allowance.

Is sick pay relevant for the calculation of the personal contribution??

Yes. But perhaps less than you think. Because for the 4 percent minimum contribution your income from the normal employment time counts as well as the sick pay, which was paid to you by the legal health insurance. Wage-replacement benefits such as unemployment, sickness or short-time worker’s allowance count as income subject to social insurance contributions.

Can the allowance office claim money back after cancellation??

Yes. The Zulagen-stelle pays you the state allowances in full first of all. After the fact, they will check whether and to what extent you were entitled to the money in a particular application year. The agency has had more than four years to do this so far. The period has been reduced from four to two years in January 2018. If the check shows that you have received all or part of the allowances wrongly, the allowance office will have the money debited from your Riester account again. Since you had already terminated the contract, she is now asking you to transfer the money.

Why is the allowance reduced despite correct personal contribution??

Raise an objection. The allowance office has certainly added the tax- and social insurance-free top-up amount to your riester-relevant income in addition to your gross wage subject to social insurance. This increases your own contribution for the full allowance. If you want to exclude such errors from the outset, inform your provider about the partial retirement and provide a copy of your salary certificate.

Residential Riester: Financing and deleveraging

What applies if I want to use Riester to reduce the debt on my residential property??

It must be the repayment of a loan that you have taken out for the construction or purchase of an owner-occupied property, not for modernization. The minimum withdrawal is 3 000 euros. If you only want to use part of your credit, at least 3,000 euros must still remain on the contract. Multiple withdrawals are also possible.

How can I use Riester to finance my own home??

Above all, you must make sure that the building savings contract fits in with your home ownership plans. This includes, for example, the amount of the home savings sum. However, it is also important that the building savings contract is ready for allocation and is thus available when you want to realize your home ownership plans. You should therefore always have the building society draw up a savings and repayment plan for you.

You can only avoid taxation of the housing subsidy account if you pay an amount equal to the account balance back into another Riester savings contract. However, you will then have to pay tax on the pension payments from this contract at a later date.

Riester as a married couple

As a housewife I pay the minimum contribution. Why are the allowances reduced??

This depends on whether your husband, as the main saver, pays in enough. Only then are you entitled to the full allowances as an indirectly subsidized Riester saver. Perhaps your husband has forgotten to adjust his contribution after a salary increase.

What happens to my wife’s subsidy when I retire?

No. If you retire, your wife will no longer receive the allowance. If the directly eligible partner "no longer belongs to the eligible group of persons," the medium-term subsidy also ceases to apply, according to the Federal Ministry of Finance.

If your wife only has a few years left until she retires, she should continue to pay in the 60 euro minimum contribution per year even without the subsidy. In the case of Riester pension insurance and Riester bank savings plans, there are final bonuses for savers who have staying power and stick with the contract to the end. She could also bring forward the start of her pension. However, not all providers allow this.

My husband is on parental leave. May he pay in more than the pure allowances?

He even has to pay in more. Because fathers and mothers who are bringing up children are directly eligible for support. You must pay at least the basic contribution of 60 euros per year. Voluntarily you can also pay more. Caution: The minimum own contribution for the full allowance depends on the previous year’s gross income. If a mother or father earned the usual employee income in the previous year during the child-rearing period, the required personal contribution is based on this income.

Divorce: What happens to contract and subsidy?

What happens to Riester contracts in the event of divorce??

Riester contracts are subject to the pension equalization scheme. In principle, this means that all pension entitlements acquired by you and your partner during the marriage period are divided equally between you.

Example: The wife has already saved before the wedding time a Riester contract. The assets from this were 10,000 euros at the beginning of the marriage and then 20,000 euros at the time of divorce. The so-called marriage time share thus amounts to 10,000 euros. Half of this is the equalization value. The wife, who is still liable for equalization, must grant this to her future ex, the person entitled to equalization. If the husband has also acquired his own pension entitlements, half of the marital portion will be allocated to the wife. The result is an equalization of the pension entitlements.

What does the division of the contract cost??

This depends on whether the division is internal or external. In the case of internal division, division costs may be incurred, which must be reasonable and are subject to judicial review in individual cases. Hamburg-based pension consultant Martin Reibig explains: "According to case law, a maximum of 500 euros may usually be charged for pension contracts that run as an insurance policy, which the two ex-partners have to pay in equal shares."

In the case of internal division, this cost share already includes the acquisition costs for the new contract. In the case of an external division, no division costs are deducted, but depending on the Riester contract selected, new acquisition costs may be due.

Can I continue to save for a split Riester contract??

Basically yes. Saving is possible until the beginning of the payment phase, informs the Central Allowance Office for Old Age Assets (ZfA), which administers the Riester subsidies. After internal division, this is usually possible at the request of the person entitled to equalization. You should ask the provider for details.

But external division can lead to problems in practice. Externally divided contracts are not allowed to continue saving with some providers, but have to be shut down until pension payments are made. Then only a one-time investment of the transferred supply claim is possible. Anyone who wants to continue to make ongoing provision for old age with Riester and take advantage of the subsidies will have no choice but to conclude a separate contract.

Can I transfer the Riester capital after the pension equalization??

Yes, in principle. But it can happen that you have to search for a long time. For the providers, such contracts can entail higher administrative costs, which some of them obviously shy away from and therefore do not accept contracts with pension equalization.

Does the guarantee apply if the contract is in the red at the time of the divorce??

No. The Riester guarantee – that is, the promise that savers are assured of the sum from deposits and allowances at the start of the pension – only comes into play at the beginning of the payout phase. If you divorce during the savings phase, the Riester assets that are available at that time for the pension equalization are divided.

Contact your provider on the question of value determination in the case of Riester fund savings contracts.

What is the share of the marriage period??

It depends on which of the two values is higher.

Example: You have taken out a Riester fund savings plan at an early stage. When you get married, 10,000 euros in contributions and allowances have already flowed into your contract, and the fund value of your contract, including appreciation, is 15,000 euros at this time. During your marriage, a further 2,000 euros will flow into the contract. The fund value at the end of their marriage is 18,000 euros. So during the marriage there was an increase in value of 3 000 euros. These are divided in the pension equalization. The compensation value is 1 500 euros. If things go badly on the stock market and the value of the fund at the time of your divorce is only 14,000 euros despite the payments of 2,000 euros, your ex-partner will not be left empty-handed. In this case, the 2,000 euros are divided between contributions and allowances.

How does the marriage time share turn out if the contract is in the red??

In this case, it is not yet possible to determine the marital portion, so the contract is presumably not included in the pension equalization. However, this is decided by the competent family court.

What are the conditions of the contract after divorce??

In the case of Riester insurance, for example, the contract is de facto divided, and the beneficiary receives his or her own contract. The idea is that the design features of the old contract are also transferred. However, the practice often looks different.

"The question, which conditions this new contract must offer, does not fall into the area of responsibility of the ZfA. For this is referred to the providers", it is said at the allowance office. The Hamburg pension consultant Martin Reibig has observed that in practice the new, own contract often only comes into being at the currently valid conditions.

Can I have the transferred Riester entitlement paid out directly??

Yes, you can. As a rule, however, this is not advisable. A payout before the end of the term is considered a so-called harmful use for tax purposes. In this case, you must repay the state subsidy allocated to you by the pension equalization – i.e. both the transferred allowances and the proportionate tax reductions received – to the allowance office.

How is the Riester pension taxed after a pension equalization??

A Riester pension from a pension equalization is normally taxed in the same way as all other Riester pensions: at your personal tax rate. This is based on the amount of your income as a pensioner.

However, since the payments from a divided pension are often low, you may be eligible for a special benefit: small-amount pensions are paid in full. Riester pensions that would not be higher than 31.85 euros per month in 2020 are paid out by the provider in one go. This drives up income tax. You can find out more about this in our article Riester payout in a tax check.

What role does eligibility play in pension equalization??

No. What the eligibility for allowances looks like is irrelevant for the pension equalization. The marital portion is divided in half. If you are only entitled to indirect allowances, however, you will lose your entitlement to allowances when you divorce (see next question).

Can housewives and househusbands continue to save for their pension after divorce??

There are two ways to qualify for the Riester subsidy: You are subject to pension insurance yourself – for example, as an employee – or you are married to a Riester saver who is subject to pension insurance. Since the second option no longer applies to you, you would have to become liable for pension insurance yourself. The usual way: employment that is subject to pension insurance. A mini-job can be enough. Important: You must change your previous application for allowances accordingly.

If you are not immediately entitled to allowances after your divorce, you can continue to save for your existing contract without the allowance or put it on hold for the time being.

If one of your children is still under the age of three, you are still in the child-raising period and therefore automatically liable for pension insurance, i.e. you are directly entitled to the allowance even if you are not engaged in any activity that is liable for pension insurance.

What happens to the Riester child allowance in the event of divorce??

The child allowance is generally paid to the spouse entitled to the allowance, who also receives the child benefit. The child allowance is 185 euros for children born before 2008 and 300 euros for children born after 2008. The child allowances received until the divorce are divided in the pension equalization for the marriage period. If the other partner is to receive the child benefit after the divorce, he or she will also receive the Riester allowances for the children in the future.

At the end – the payout phase of the Riester pension

Do I have to live forever for Riester to be worthwhile at all??

You must actually reach old age in order to receive more money as a pension over time than you previously paid in. That’s true of any insurance policy that guarantees an annuity until death. If you have already reached a certain age, you can also expect to grow old.

If you are already 65 years old today, you can expect to live another 21.1 years as a woman and another 17.9 years as a man, according to the Federal Statistical Office (mortality tables 2017/2019). The average life expectancy of all people in Germany is lower than the average of all people in the world.

However, the life expectancy that insurers reckon with is often higher than that of the authority. Among other things, they take into account the fact that people with pension insurance live longer on average than those without. Some insurers overdo it with their calculations on longevity. Added to this are the low interest rates. Both of these factors together have a strong impact on the pension amount.

Loss of support despite pension guarantee?

Yes. At least if your wife cannot have the lump-sum death benefit transferred to her own Riester contract. In practice, such transfers have so far proved to be extremely complicated.

If the allowed capital payout is 20 or 30 percent?

Then you have still concluded a contract according to the old rules. In contracts certified in accordance with the version of the Retirement Provision Contracts Certification Act (AltZertG) valid until the end of 2004, only a partial capital payment of up to 20 percent was provided for at the start of the pension. With the change of the law this limit was increased to 30 percent from 2005. According to Section 14 (1) of the AltZertG, providers had the choice of leaving their contractual terms and conditions in the already certified contracts as they were or adapting them to the new regulations.

What is the difference between subsidized and unsubsidized capital??

Unsubsidized capital is treated differently for tax purposes than subsidized capital. Of the part of the pension that consists of unsubsidized contributions, you only have to pay tax on the small -income share. It depends on your age. If you are 65 years old at the start of your pension, the tax rate is 18 percent. If 60 percent of your pension of 2,000 euros per year consists of subsidized contributions and 40 percent of non-subsidized contributions, 1,200 euros are subject to full taxation; of the remaining 800 euros, you only have to pay tax on 18 percent. Even with unsubsidized Riester contracts, the capital paid in is guaranteed at the end of the contract term.

Are there good offers for the payout phase??

Only theoretically. Although the possibility of switching to the payout phase is provided for by law, it is still possible. But there are hardly any companies that annuitize the savings of other Riester customers.

Do I have to pay withholding tax on my Riester fund savings plan??

No. Payments from subsidized Riester fund savings plans are taxed at your personal tax rate. You can find more information in our article Riester payout in the tax check.

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