Riester Pension Facing Record Cancellations as Alternatives Emerge
The Riester pension, introduced in 2002 to bolster German pensions, is facing a wave of cancellations. As of now, one in four of the 20 million contracts concluded has been terminated, with almost 220,000 cancellations in the first eight months of 2025 alone. The scheme, which primarily benefits families and low-income earners, is set to see a record number of cancellations this year.
The Riester pension, named after the then-minister of labour Walter Riester, has not lived up to expectations. It was designed to plug the pension gap but has been criticized for being too expensive, complicated, and opaque. The high acquisition and administration costs, coupled with a low maximum interest rate, mean it offers almost no return. Finanztip editor-in-chief Saidi Sulilatu has proposed a state-funded savings account as an alternative, with capped costs and subsidies for normal and low-income earners.
The federal government is set to introduce the 'early start pension' in 2026, providing children aged 6-18 with a monthly state deposit of ten euros. This move is seen as an attempt to address the shortcomings of the Riester pension and engage young people in pension planning earlier. However, plans for a replacement solution for the Riester pension system are already underway, as the current system is seen as increasingly unsustainable.
The Riester pension's future is uncertain, with cancellations reaching record levels and plans for a replacement system in motion. The 'early start pension' is a step towards engaging younger generations in pension planning, but the search for a sustainable and effective private pension scheme continues.
