New Private Retirement Plan Reflects Scientific Recommendations
Last week, Germany’s Federal Council approved the Retirement Plan Reform Act, overhauling the previously state-subsidized Riester pension scheme. Prof. Raimond Maurer from Goethe University Frankfurt’s Faculty of Economics and Business was a member of the federal government’s focus group on private retirement provisions, which developed many of the reform proposals. Maurer welcomed the government’s decision to follow the experts’ recommendations and expressed hope that this approach will continue in future reform efforts.
With the Federal Council’s approval, the law reforming tax-subsidized private retirement provisions has cleared its final parliamentary hurdle after previously passing its third reading in the German Bundestag. Once signed by Germany’s president and published in the Federal Law Gazette, the reform is scheduled to take effect on January 1, 2027.
The new legislation fundamentally reshapes existing Riester pension system. The aim of the reform is to make state-supported private retirement savings simpler, more flexible, more cost-efficient, and more attractive in terms of returns. It responds to years of stagnating participation in the Riester scheme and is intended to provide fresh momentum for private retirement planning in Germany.
This reform reaches far beyond the more than 15 million existing Riester contracts. “It gives younger generations the opportunity to participate early, affordably, and with government support in the long-term return potential of capital markets as part of their retirement planning,” says Prof. Raimond Maurer, Professor of Investment, Portfolio Management, and Retirement Provision at Goethe University Frankfurt. “In light of demographic change, it is becoming increasingly important to make better use of the opportunities offered by long-term capital investment.”
Maurer is particularly pleased that lawmakers largely adopted the recommendations developed by the focus group on private retirement provision, which the federal government established in 2023 and of which he was a member. “It is also remarkable that the reform has remained largely intact despite the change in government. Only very limited adjustments were made to the focus group’s final report during the legislative process.
In my view, these changes were appropriate and reasonable, and it is important that the core principles of the reform were preserved. Overall, the reform marks an important step toward making private retirement provision in Germany more future-oriented, more closely linked to capital markets, and more attractive to younger generations.”
Maurer would also welcome these guiding principles being incorporated into the federal government’s plans to reform the retirement system – particularly with regard to early retirement and occupational pensions. “If we succeed in linking these three pillars intelligently, Germany would have the opportunity to create one of the world’s most modern retirement systems.”
Source: Goethe University
Further information: ZDF Heute, Bundesrat
Photo: Uwe Dettmar
