In addition to funding, the Riester successor offers tax advantages. That sounds tempting for high earners. But there are alternatives - including a product that was previously controversial.
Munich. “Germany is retiring.” With slogans like this, financial service providers draw attention to their retirement savings portfolio offerings. The Riester successor is not only touted by many consultants as a subsidized building block for retirement planning, but is also offered to high earners with a gross salary of around 5,900 euros per month as a tax-saving model.
Because significantly more can be invested in the retirement savings account than the 1,800 euros per year that are necessary to receive the maximum funding.
From the perspective of experts, it may be worthwhile for people with high incomes to pay more into the new portfolio. But there are alternatives. The Handelsblatt shows what these are and why a retirement savings account should always play a role when saving for old age.
The retirement savings account
The retirement savings account will replace the Riester pension from 2027. Here too, the state saves money. Up to 540 euros in funding per person are possible annually. To do this, from 2027 onwards, 1,800 euros per year must flow into a financial product that is certified as a retirement savings account. There will be at least one standard product from each provider, the total cost of which may not exceed one percent of the invested amount. Financial service providers can also offer retirement accounts with higher costs.
The benefits
Savers can also pay more into their retirement savings account than is necessary for maximum funding. In total, this should be possible in up to two contracts, each of which can receive a maximum of 6,840 euros. Deducting the 1,800 euros that are paid in to receive the highest individual funding, a further 11,880 euros can be paid in per year across both contracts without funding.
This can be worthwhile, as calculations by the Handelsblatt show. If the two retirement savings accounts are saved with a maximum return of 6.5 percent after costs, around 1.3 million euros can be accumulated in 30 years. The 16,200 euros in state funding paid out up to that point more than tripled during that time.
No taxes should be incurred when reallocating the retirement savings account, regardless of whether it is in the subsidized or unsubsidized part. The so-called advance flat rate that savers have to pay for reinvesting ETF savings plans or other savings plans also does not apply.
In retirement, a distinction must be made between the subsidized and the unsubsidized part of the retirement savings account. A maximum of 30 percent of the funded portion may be paid out. The entire capital of the partial payout is taxed at the personal tax rate. The rest must go into a payout plan or be paid out as an annuity for life.
The portion of the retirement savings account saved without support can be paid out completely in one fell swoop. In this case, the half-income procedure applies. Only half of the income is taxed at the personal tax rate. However, if the money was invested for less than twelve years, the withholding tax applies to the entire income.
Funding also plays a role in a payout plan in which the capital is paid out gradually over a certain term: regular payouts from the funded capital are subject to the personal tax rate. For the unsubsidized part, it depends on when the payment plan begins. If the plan starts at age 65, 18 percent of the payout rate is subject to the personal tax rate. If the plan starts at age 67, the taxable portion is reduced to 17 percent.
With a lifelong annuity, the money flows until your last breath, guaranteed. According to Niels Nauhauser from the Baden-Württemberg consumer advice center, that sounds attractive. But a pension insurance company can only invest a small amount in the stock market. She must invest carefully to guarantee a lifelong pension. “The returns are significantly lower than with a payout plan and the costs are significantly higher,” explains the consumer advocate. For tax purposes, a distinction is also made between the subsidized and the unsubsidized part of the payments. The rules correspond to those of the payout plan.
The disadvantages
As a subsidized product, the retirement savings account is inflexible in some respects. The payout phase must begin between 65 and 67. “Anyone planning to spend their retirement outside the EU runs the risk of having to repay the funding,” says Marcel Reyers, board member of the Financial Planning Standard Board, a financial planning association.
Financial planner and specialist author Stefanie Kühn warns against paying more into a retirement savings account than is necessary for the funding just because of taxes. “In 30 or more years it will be very difficult to find out whether the taxes were really calculated correctly,” says Kühn.
The net policy
The net policy is a form of pension insurance. Many small amounts or one large contribution are paid into them on a regular basis. Because of their high costs, pension insurance is considered by financial planners and consumer advocates to be of little use.
Net policies are cheaper because there are no commissions from the insurance company to the seller of the policy. They are sold by insurance advisors who work for a fee. The hourly rate for an insurance advisor is usually between 150 and 200 euros plus VAT. According to financial planner Reyers, two to four hours are enough to explain such a policy. In addition to this one-time fee, there are regular fees for the insurance cover and the ETFs it contains. The bottom line is that costs range from around 0.5 to one percent of the credit.
The benefits
As with retirement savings accounts, people who make provisions with a net policy can continually shift funds during the deposit phase without having to pay taxes.
Investors have several options during the payout phase. From the perspective of many experts, the lifelong pension is considered the weakest option from a return perspective. “You have to be well over 90 so that the payouts correspond to the capital you previously saved,” says consumer advocate Nauhauser.
However, the pension appears attractive from a tax perspective. Because with it, only the portion of the income is taxed, which changes depending on when the first payment is made. If the pension starts at age 64, 19 percent of the pension is taxed at the personal tax rate. If the pension is paid out for the first time at 75, it is only eleven percent.
As an alternative to a lifelong pension, the money saved can also be paid out in one fell swoop. Here, 15 percent of the income is deducted as a so-called partial exemption. The remaining 85 percent is halved and taxed at the personal tax rate.
An example: Of the 500,000 euros of total income, 425,000 euros remain, half of which, i.e. 212,500 euros, must be taxed. If the personal tax rate is 42 percent, 87,500 euros are due. This corresponds to a tax rate of 17.5 percent and is therefore slightly lower than the withholding tax rate plus contributions of a good 26 percent less the partial exemption of 30 percent that applies to a pure stock ETF.
In addition to these two options, holders of a net policy can also take part of the capital immediately and annuitize the other part.
The disadvantages
ETF policies cost more than a portfolio that you manage yourself. This is already an exclusion criterion for Stefanie Kühn. Whether the tax advantages outweigh the costs can only be determined retrospectively. Marcel Reyers warns: “The policies are the same in their basic structure, but the details are very different.”
Some providers cap any additional payments or exclude payment plans. While the entire ETF universe is open to investors with an unsubsidized ETF portfolio, some providers have fewer than 50 ETFs to choose from. That may not be enough for ambitious investors.
Net policies are not products actively promoted by insurance companies. There are also only a few insurance advisors nationwide who offer these policies. And here, too, it is important to ask about the costs beforehand: “It sometimes happens that regular fees are required in addition to the consulting fee,” warns Marcel Reyers.
If the policy is paid out in one go, the owner of the policy must be at least 62 years old and have previously saved for the insurance for at least twelve years.
The ETF depot
Even without funding or insurance, you can take precautions. A simple ETF savings plan is already the method of choice for millions of people in Germany.
The benefits
The price war between banks and brokers has caused custody fees to more or less disappear, and according to a survey by the Handelsblatt, the order costs for ETF savings plans are a maximum of two percent of the savings amount, but are often even lower.
Many banks and brokers offer a four-digit selection of ETFs on their platforms. According to Stefanie Kühn, not all ETFs make sense. The financial planner doesn't particularly think much of so-called ETFs that have only been launched on one topic, but a lot of supply also means that the same ETF is available from many different providers.
In Kühn’s words, “quite a lot of life happens” between starting a career and retirement. She is alluding to the fact that the flexibility of a portfolio can be a real advantage when it comes to using a large part of the money saved with ETFs for home ownership.
The disadvantages
An ETF portfolio is not funded. Every shift leads to taxes – withholding tax, solidarity surcharge and, under certain circumstances, church tax – becoming due. Thanks to the partial exemption for stock ETFs, the combined tax of a good 26 percent is only deducted from 70 percent of the income, but the tax is due every time shares in an ETF are sold or ETFs are exchanged. In addition, there is an upfront flat rate for reinvesting ETFs.
In comparison to the pension portfolio and the net policy, there is no fixed payout period for the ETF portfolio and no tax benefits. If the individual ETF tranches are gradually sold, withholding tax etc. must be paid again and again. The so-called first-in-first-out rule (known as FIFO for short) applies. The oldest savings plan tranches, which have generally achieved the highest profits over time, are sold first.
What is worthwhile for whom?
Stefanie Kühn and Marcel Reyers agree: Anyone who is a high earner - i.e. with a gross annual salary of around 70,000 euros or more - can expect a reasonable statutory pension and possibly a company pension should only take the support with them from their retirement savings account.
This means: These people should save a maximum of 1,800 euros per year in order to receive the highest possible personal funding of 540 euros. Parents should also consider support for their children. This group should not put more money into a retirement savings account.
“These people should use their private pension provision to be flexible,” says Kühn. An unsubsidized depot in which ETFs are saved is very suitable for this. This approach is also advantageous for investors who do not reallocate their portfolio much. If you consistently buy and hold ETF shares and rely on index funds that reinvest their profits, your tax disadvantage is comparatively small compared to a retirement savings account and a net policy.
In his opinion, the greater flexibility in the deposit and payout phase speaks in favor of the net policy. “You can withdraw contributions at any time and retire later or earlier than between 65 and 70,” he says. In any case, the retirement savings account should be saved in such a way that the highest possible funding is received.
