Examples of Riester products are private pension insurance policies of life insurers, payment plans of banks and unit-linked saving plans of asset management and investment companies with subsequent annuity payments payable from the age of 85.

What are the benefits of a Riester pension?

The objective of a Riester pension is to partially fill the gaps resulting for employees from falling statutory pension levels and for civil servants from declining pension entitlements. This is done by each person setting up a fully-funded pension provision plan.

Government aid is available for a variety of saving schemes. In addition to the aforementioned private pension insurance policies, bank saving schemes and unit-linked saving plans, there are also the various occupational retirement provision schemes such as Pensionskassen, Pensionsfonds and direct insurance by way of deferred compensation. Another state-subsidised form of pension saving is the home ownership pension known as “Wohn-Riester”, in which capital is paid from the savings contract for the purpose of building or purchasing a home. You can also use the Wohn-Riester to pay off a property loan.

Riester savers pay contributions on a monthly, quarterly or yearly basis until they enter retirement. They may themselves determine and alter at any time the amount they wish to pay in accordance with the conditions set out below. Savers must pay at least the basic amount of EUR 60 per year in order to receive state subsidies in the first place. To receive the subsidies in the full amount, savers have to contribute at least an annual four percent of their income subject to social security contributions – but no more than EUR 2,100 after deducting basic and child allowances. The specifications are set out in the German Income Tax Act (Einkommensteuergesetz).

The company offering the Riester product makes a commitment to the Riester saver that, when the payout phase begins, at least the sum total of the paid contributions and state subsidies will be available.

A Riester pension is a life-long pension. For payment plans with subsequent annuity payments, a life-long pension must be paid from the age of 85 at the latest.

For which persons might a Riester pension be suitable?

Riester pensions are particularly suitable for employees keen to build up additional retirement provision in order to supplement their statutory pension.

For savers who value security and want to know at the time they enter into a contract how much they can expect to receive as a minimum pension payment during retirement, the traditional Riester pension insurance is especially worth considering.

Self-employed persons who are not voluntarily insured in the statutory social insurance system are not entitled to the state subsidies under the Riester pension scheme and are therefore unable to benefit from these subsidies if they take out a Riester pension. The same applies to students not obliged to make pension insurance contributions, and to low-paid, part-time workers. Persons compulsorily insured in professional retirement schemes such as doctors, pharmacists, architects or tax consultants are also excluded from the government subsidies under the Riester pension scheme..

What do I need to bear in mind with a Riester pension?

• Please bear in mind that the current low interest rates are negatively impacting the returns on the Riester saving forms of bank saving plans and private pension insurance policies, and are also lowering the returns on the various forms of occupational retirement provision. Please also take a close look at the costs.
• In the Riester saving form of a private pension insurance policy, the payment of benefits to surviving dependents is subject to restrictions. If you wish to avoid a situation in which, in the event of your death, your surviving dependents forfeit the insurance capital in favour of the community of policyholders and therefore do not receive any payments from the insurance, please ensure that you make arrangements for this in the Riester contract in the form of a supplementary agreement.
• If you move to another country or work abroad, you should find out whether you will continue to receive the state subsidies or be obliged to repay subsidies already granted, as this differs from case to case. We recommend that you contact your tax office or the company providing the Riester pension and that you read the information and brochures published on the website of the Federal Central Tax Office (Bundeszentralamt für Steuern).
• With a Riester pension, you may arrange for a maximum 30 percent of the capital available under your contract at the start of the payout phase to be paid out in a lump sum. The remaining 70 percent are converted into a life-long pension. Please bear in mind that this payment of capital is subject to full taxation.
• As a general rule, the payment of pensions may only start from the age of 62. If the Riester contract was signed before 1 January 2012, the pension may be paid from the age of 60 at the earliest.
• Riester products are generally subject to tax relief. Information and advice can be obtained from local financial authorities (Finanzämter), your tax advisor or income tax assistance associations (Lohnsteuerhilfevereine). BaFin is not in a position to offer advice on tax matters.

What are my obligations as a Riester saver/contract partner?

• You must pay your contributions punctually.
• If you wish to claim the government subsidies for your Riester contract, an application has to be made. You can also do this by applying for a permanent subsidy. Please note that if there is a change in your earnings situation or a new addition to your family, you must make the corresponding change to the permanent subsidy application so that you receive the full subsidies to which you would then be entitled.
• Other obligations can arise in connection with the terms of the pension insurance contract, the bank saving scheme or the unit-linked saving plan.

Where can I take out a Riester pension?

You can take out Riester products at the offices of banks and insurance companies or online. Or you can contact an insurance intermediary (insurance broker or insurance agent). You also have the possibility of taking out a Riester pension via financial investment intermediaries, asset management companies, Bausparkassen or cooperative housing associations. Another possibility is that your employer offers you the option of participating in a Riester saving product as part of an occupational retirement scheme or pension insurance based on deferred compensation.

What information is the company offering the Riester contract required to provide?

Companies offering Riester products are obliged to provide you with the specific information set out below.

• The insurance product information document (IPID), which contains information that consumers need to know when entering into a contract or that are of particular importance for the fulfilment of the contract. The IPID also contains a statement of the costs.
• The annual customer information about how the contributions paid are being appropriated, the amount of capital accumulated, the actual costs incurred in the last contribution year and the returns generated.
• Information before the payout phase of the retirement provision contract, two years before the start of the payout phase at the earliest.

Consumers are advised to note that different obligations can apply, depending on the particular distribution channel. If consumers enter into a Riester saving contract with an investment services enterprise, the enterprise must, on request, give the consumers in particular detailed information on all the costs and associated costs of the contract. These costs must be stated in such a way that the consumers are able to understand both the overall costs as well as the cumulative effects that the costs are having on the return of the investment. On request, the consumers must be given an itemised statement of the positions. When handing out the individual insurance product information documents, the providers must explicitly notify their customers of this right to request this specific information.

What can I do if I no longer want my Riester contract?

You may terminate a Riester contract. But please bear in mind that you will not be reimbursed the acquisition and administrative costs of the contract. What is more, you will not only have to pay back the previously granted subsidies but you might also have to repay any tax relief that you received.

You also have the possibility to change to another company providing Riester pension products. In such a case, the capital of the previous contract is transferred to the new Riester contract at the other provider. However, the new provider may decide whether to accept your application to change providers. Subject to the terms of your agreement, you may be charged a fee for changing your provider. Your provider is obliged to inform you, before the contract is signed and during the term of the contract, of the costs that you will be charged if you wish to change to another investment product or provider. The costs are also usually explained in the general insurance policy conditions applicable for your contract.

You may also temporarily suspend payment of your contributions to a Riester contract. This means that you no longer have to pay any contributions, but you also forfeit the state subsidies. The advantage in suspending payment of your contributions is that you do not have to pay back any of the state subsidies received up until then. And when you resume payment of the contributions, you may make a new application for government support. Please note, however, that if you temporarily suspend payment of your contributions, you still have to continue paying the administrative expenses incurred by your provider. You should also bear in mind that your pension entitlements can turn out lower than those initially calculated.

How are Riester pensions supervised?

Riester products may only be distributed in Germany under this name if they have been certified by the Certification Office that belongs to the Federal Central Tax Office. The German government only grants subsidies to pension provision contracts that have this certification. The Certification Office examines whether the retirement provision contract fulfils the requirements for government subsidisation. We strongly advise you to ensure that the Riester product in which you are interested has been certified. You can obtain information on certification from the Federal Central Tax Office.

The examination procedure does not encompass a quality control of the product on offer. It also does not check whether the Riester product is economically viable, the commitments entered into by the company offering the product can be fulfilled or the terms of the contract are effective under civil law..