Riester pension

The German Retirement Assets Act (Altersvermögensgesetz – AVmG) is concerned in part with state funding for expenses incurred in the area of the so-called second and third pillars of the three-pillar pension scheme. In this manner, the lowering of the pension level within the first pillar of the pension scheme under the statutory pension insurance is meant to be compensated by the Deutsche Rentenversicherung Bund and the closing of the provision gap.

Thus, within occupational pension provision – the so-called second pillar – there are state funding opportunities for the payments made into pension funds. The third pillar of the pension scheme – private pension provision – also receives state subsidies. However, this subsidy is only intended for a certain class of beneficiaries.

While the professional pension funds are considered part of the first pillar of the pension scheme, contrary to the statutory pension insurance scheme, there is no lowering of the pension level within the professional pension funds. State funding for additional private pension expenses is therefore not necessary. For this reason, participants in professional pension funds do not belong to the class of beneficiaries who receive state funding. Especially for participants in the Architects’ Pension Fund (VwdA) private savings of additional contributions in fully funded pension products (life insurance etc.) are unnecessary, since the VwdA is already fully funded. This means that the VwdA’s pension level is higher than that of the statutory pension insurance scheme.

Since 1 January 2002, employees are entitled to have their employer convert their salary into occupational pension insurance. However, no (special) payments made to the Pension Fund are funded within this scope. Your employer or tax consultant can provide you with more detailed information on potential methods for converting compensation.

Self-employed persons do not generally fall into the tax category of persons who receive so-called “Riester funding”. However, there are certain configurations which can, indirectly and in conjunction with the spouse, make you eligible for funding if the spouse has taken out compulsory insurance with the Deutsche Rentenversicherung. Your tax consultant can provide you with more detailed information.

If your spouse has taken out compulsory insurance with the Deutsche Rentenversicherung in any form and you and your spouse file your income taxes jointly, this constitutes an exception which allows you, too, to receive funding in the third pillar (private pension provision) upon obtaining so-called “Riester products”. We ask that you contact your tax consultant personally for clarification of the details.