Who receives the child allowance?
The government supports Riester contracts with bonuses and tax advantages. The basis of the Riester funding is the basic bonus for the saver themselves and the child bonus if the saver has children. The child bonus is not automatically received by the parent who also receives the child benefit, but generally by the mother if married. If both parents apply, the child bonus can also be transferred to the father.
To do this, you must enter the number of children in your tax return - in the AV annex - for whom the child bonus is to be transferred from the mother to the father. You must also specify in the bonus application with your Riester provider if you want to transfer the child bonus to the father. If the parents are permanently separated or not married, the child bonus goes to the parent who is fully taxable and actually receives the child benefit.
This can also be a stepfather or stepmother. If the entitlement to child benefit changed during the year, the decisive factor is who received the child benefit at the beginning of the year.
To receive the full funding, you must save four per cent of the previous year's income subject to social insurance contributions. The relevant amount is the previous year's income. If you save less, you will receive a partial bonus. If you are temporarily not liquid, you can suspend your Riester contract, but you will also have to forgo the government funding. Non-eligible spouses can receive the basic bonus if they have their own Riester contract and pay in at least the minimum amount of 60 Euro.
The following calculation shows how the funding works for a family with two children:
The gross family income is 40.000 Euro in the year 2023. For the full funding, at least 1.600 Euro must be paid into the Riester contract in the year 2024.
The government helps with the basic bonus of a total of 350 Euro for both spouses (2 times 175 Euro).
In addition, there is the child bonus of 185 Euro per child (born before 2008). For two children, this amounts to 720 Euro in government bonuses that the family is entitled to annually. These are deducted from the 1.600 Euro minimum savings, so the family only has to contribute 880 Euro in the year 2024. If the personal contribution is lower, the funding will be reduced accordingly.
Who receives the child allowance?
Will I have to pay tax on my Riester pension later?
Yes. Since the Riester pension is built up from untaxed income, later payments are subject to regular income tax. The pensions are therefore not only taxed on the income share (the interest), as is the case with payments from a private pension insurance that is not state-supported. Pensions from a Riester contract must be fully taxed in retirement, although they benefit from the retirement relief amount.
For future pensioners, this means: If they have taken out a private pension insurance that is not subsidised and for which they pay contributions from taxed income, they only have to tax the income share in retirement. However, if the pensioners have chosen an investment form for which they have received state bonuses, they must tax the pension at their personal tax rate. This depends on the total income of the retiree. This applies to all subsidised investments, including insurance as well as fund or bank savings plans.
The good news: No withholding tax, as this is not capital income, but "other income". Although, for example, capital gains from conventional fund savings plans have been subject to withholding tax since 2009, Riester fund savings plans are exempt from withholding tax. This also applies to profits from other Riester investments. However, the pensions must be taxed at the personal tax rate (deferred), which depends on the total income.
Wohn-Riester: Complicated taxation. For Wohn-Riester, deferred taxation is applied. The contributions remain tax-free, only the pension itself must be taxed - at the personal tax rate. And this is where it gets a bit complicated with Wohn-Riester: The contributions and bonuses are recorded on an imaginary "housing subsidy account" with assumed interest of two percent. However, the saver cannot access the account, as the funds recorded there are invested in property funding and no longer exist in principle. At the start of the "payout phase", when other "conventional" Riester savers receive their pension and have to tax this income, the Wohn-Riester saver also receives a notice of their tax debt that has accumulated on the imaginary account over the years. The homeowner pensioner then has a choice: Tax everything at once and receive a 30 percent discount as a reward. Or opt for gradual taxation: Here, they can pay off their tax debt in instalments over a period of up to 23 years, like anyone receiving a regular Riester pension. Again, the tax rate depends on the retiree's total income.
Will I have to pay tax on my Riester pension later?
Which important data can I find in my provider's statement?
The provider, i.e. the bank or insurance company with which you have a Riester contract, sends you an annual statement of your current "account balance", providing an overview of your accumulated Riester capital. You will also receive the so-called provider certificate for your records once a year.
This document contains all important data, such as the reference numbers for your contract, including the provider number, the certification number, and the contract number. You must enter this information and the amount of contributions paid in your tax return.
If you have a Riester savings contract, such as an investment fund savings plan or a traditional pension insurance, the provider certificate will also show the total amount of all pension contributions (excluding bonuses). These contributions are also reported to the tax authorities by your provider. You do not need to enter pension contributions that you paid in 2024 for years up to %VZ-5%.
If you are saving for retirement with Wohn-Riester, please enter the repayment contributions used to pay off a mortgage or save into a building society savings contract. You can find these figures on your provider certificate.
Which important data can I find in my provider's statement?
Am I entitled to the Riester bonus for every private pension plan?
No. You cannot receive Riester funding for every private pension plan. Only pension contracts certified by the Federal Insurance Supervisory Office are eligible for funding. The following conditions apply for certification:
- Start of pension: Payments may begin no earlier than the age of 60 or the statutory retirement age. For contracts concluded from 1 January 2012, payments may not begin before the age of 62.
- Payment: Payments must be made as a constant or increasing pension; for new contracts, a lump sum of up to 30 per cent is also possible. From the age of 85, a lifelong pension guarantee must be in place.
- Contribution guarantee: At the start of the pension phase, at least the contributions paid plus bonuses must be available.
- Distribution of costs: For contracts concluded from 2005, the initial costs must be spread evenly over at least five years. For older contracts, a limit of ten years applies.
- Non-transferable: A Riester contract cannot be assigned or transferred to others.
- Security: The accumulated capital may not be seized or pledged.
- Transparency: Providers must inform savers annually about the deducted initial, distribution, and administration costs. Costs associated with changing contracts must also be disclosed.
- Unisex tariffs: Women and men pay the same contribution for newly concluded contracts.
These certification criteria only indicate which pension contracts can be funded. However, certification is not a seal of quality for a Riester contract.
Am I entitled to the Riester bonus for every private pension plan?
How much do I need to save annually to receive the Riester bonus?
The government supports Riester contracts with bonuses and tax advantages. The basis of the Riester funding is the basic bonus for the saver and, if applicable, their spouse. The amount of the basic bonus depends on the savings amount. To receive the full funding, you must save four per cent of the previous year's income subject to social insurance contributions, but at least the minimum amount of 60 Euro. For civil servants, salaries and official remuneration are decisive.
If you save less, you will receive a lower bonus. If you are temporarily not liquid, you can suspend your Riester contract, but you will not receive any government funding. Non-eligible spouses can receive the basic bonus if they have their own Riester contract and pay in at least the minimum amount of 60 Euro.
The following calculation for a family with two children shows the effect of the funding:
The gross family income is 40.000 Euro in the year 2023. For the full funding, at least 1.600 Euro must be paid into the Riester contract in the year 2024.
The government helps with the basic bonus of a total of 350 Euro for both spouses.
In addition, there is the child bonus of 185 Euro per child (born before 2008) or 300 Euro per child (born from 2008). For 2 children (born before 2008), this amounts to 720 Euro in government bonuses that the family is entitled to annually. These are deducted from the minimum savings amount of 1.600 Euro, so the family only has to contribute 880 Euro themselves in the year 2024. If the personal contribution is lower, the funding will be reduced accordingly.
How much do I need to save annually to receive the Riester bonus?
What is Wohn-Riester and how is it taxed?
The Home Pension Act came into force on 1 January 2008. With the home pension, state bonuses and personal savings contributions are used to finance the construction of a house, purchase a flat, or pay off a residential property. This is provided it is an owner-occupied property. You can receive the funding as soon as you are entitled to Riester funding. Anyone who is compulsorily insured in the statutory pension scheme or a civil servant is entitled to state funding through a Riester contract.
Complicated taxation
However, deferred taxation is applied to the home pension. The contributions remain tax-free; only the pension itself must be taxed - at your personal tax rate. And this is where it gets a bit complicated with the home Riester: The contributions and bonuses are to be recorded on an imaginary "housing subsidy account" with assumed interest of two per cent. However, you cannot access the account, as the funds recorded there are invested in property funding and, in principle, no longer exist. At the beginning of the "payout phase", when other "conventional" Riester savers receive their pension and have to declare it as income, the home Riester saver also receives a notice of their tax liability that has accumulated on the imaginary account over the years.
The home pensioner then has a choice: Tax everything at once: As a reward, they receive a 30 per cent discount. Or gradual taxation: Here, they can pay off their tax liability in instalments over a period of up to 23 years, like anyone receiving a regular Riester pension. Here too, the tax rate depends on the pensioner's total income.
Another sticking point: If you chose the one-off taxation, the following applies:
If you cease to use the residential property yourself within 20 years of the start of the pension phase, the remaining amount of the 30% dissolution amount must also be taxed as "other income" at the individual tax rate. But beware: The remainder of the 30% dissolution amount is to be taxed
- at one and a half times the amount if the tax-damaging event occurs in the first 10 years after the start of the pension phase (understand this penalty taxation if you can!),
- at the full amount if the tax-damaging event occurs between the 10th and 20th year after the start of the pension phase. The period after ceasing self-use is not decisive.
What is Wohn-Riester and how is it taxed?
What can I do if I have not yet received the certificate from my Riester provider?
If you did not have the provider's certificate for your Riester contract when submitting your tax return, this should not prevent you from filing the return. Generally, the provider has already submitted the data electronically to the tax authorities. Nevertheless, if you submit the provider's certificate with the "Anlage AV" later, an income tax assessment notice that is already legally binding can also be changed. The tax assessment will be amended according to § 173 para. 1 no. 2 AO if the "Anlage AV" and the provider's certificate are submitted after the tax assessment notice has become legally binding. This means: Amendment due to new facts that have become known subsequently (OFD Niedersachsen dated 16.2.2010, S 0351-67-St 144).
What can I do if I have not yet received the certificate from my Riester provider?
How can I prove my eligibility for funding?
To prove your eligibility for funding, you must provide evidence of employment subject to pension insurance. As an indirectly eligible spouse, you must provide proof of marriage. To apply for the allowance for your children, you need a child benefit notice.
And to determine the amount of your minimum payment (four per cent of the previous year's gross annual salary), you must provide proof of your income. Additional documents may be required depending on the provider and Riester product.
How can I prove my eligibility for funding?
How do I take out a Riester pension plan?
First of all, you should inform yourself about the different investment options. What best suits your personal risk tolerance? Once you know which form of Riester pension you want to invest in, you should look for a good product. Only products with a certificate from the Federal Financial Supervisory Authority are suitable.
However, the certificate does not indicate the quality or return of an offer. It only tells the saver that the relevant product is eligible for Riester funding. You can consult various tests in magazines or on the internet, or seek advice from a consultant. You should also ask an insurance company or bank to calculate the possible return without obligation and, of course, inquire exactly about the costs involved (e.g. initial fees).
Once you have made your decision, you should make an appointment with the bank or insurance company and take your time to review the documents there, making sure to clear up any uncertainties by asking specific questions. Where you take out a Riester pension contract naturally depends on the type of investment. Once you have decided whether you want to take out a traditional pension insurance, an investment fund savings plan or a bank savings plan, you should go to an insurance company or their agent, or to a bank.
If you wish to invest in Wohn-Riester, contact a building society. However, the bank savings plan as a Riester variant is currently only offered by a few banks.
How do I take out a Riester pension plan?
