Private Pensions in Germany: The Expat Guide

In 2026, an employee can funnel up to €8,112 a year, completely tax-free, into a workplace pension (bAV) — and that is just one of at least six overlapping ways Germany lets residents save for retirement outside the statutory system. Nobody explains them side by side for an international audience: most guides cover one product in isolation, in German, aimed at a domestic reader who already understands Sonderausgaben and nachgelagerte Besteuerung. This guide lines up every layer — statutory Rente, bAV, Rürup/Basisrente, private Rentenversicherung, ETF Sparplan, the incoming Altersvorsorgedepot, and legacy Riester — in one comparison, plus what changes on 1 January 2027.

Why “pension” means five different things here

Germany does not have one retirement system — it has a stack. At the bottom sits the mandatory, pay-as-you-go statutory Rente (gesetzliche Rentenversicherung), which most employees pay into automatically. On top of that sit voluntary, subsidized, or purely private layers: a workplace scheme your employer may offer, a tax-advantaged product for the self-employed, an insurance-based private annuity, a plain ETF savings plan, and — from 2027 — a new subsidized depot replacing the long-criticized Riester product. None of these are mutually exclusive. Most Germans and long-term residents end up combining two or three, and which combination makes sense depends heavily on employment status, income, and how long you actually plan to stay in Germany.

Layer one: the statutory Rente

The gesetzliche Rentenversicherung is not optional for most employees — contributions are deducted automatically and split between employer and employee. It is the foundation everyone else builds on top of, but it was never designed to fully replace pre-retirement income on its own, which is exactly why the private layers below exist. What happens to the contributions you have already made if you move away from Germany depends heavily on where you go — EU/EEA countries and countries with a German social security agreement generally preserve your entitlement, while others can be more restrictive. The full mechanics are covered in what happens to your Rente if you leave Germany.

Layer two: bAV — the employer-linked pension

Betriebliche Altersvorsorge (bAV) is a pension run through your employer, funded either by the employer directly or by you sacrificing part of your gross salary (Entgeltumwandlung) into it. The appeal is the tax and social-contribution treatment: contributions are tax-free up to 8% of the Beitragsbemessungsgrenze (the annual contribution ceiling for statutory pension insurance) and free of social contributions up to 4% of that same ceiling. In 2026 that ceiling works out to €8,112 tax-free per year and €4,056 (€338/month) free of social contributions, on top of tax (Techniker Krankenkasse, 2026 figures). Where you sacrifice salary into a bAV, German law requires your employer to add at least a 15% subsidy on top, since the employer itself saves social contributions on the sacrificed amount.

The catch is liquidity. Money in a bAV is generally locked until retirement age, and if you switch employers before your entitlement has vested, you can lose part or all of the employer-funded portion depending on the plan rules and how long you were enrolled. If your employer offers a bAV with a meaningful subsidy, it is usually the cheapest layer to add on a pure cost basis — but it is also the least flexible if your career or your time in Germany is unpredictable.

Layer three: Rürup/Basisrente for the self-employed

Rürup, formally the Basisrente, is built for people the statutory system does not automatically cover well — chiefly high-earning freelancers and self-employed professionals. In 2026, contributions are deductible as Sonderausgaben up to €30,826 for a single person or €61,652 for a couple, and unlike some other vehicles, that deduction is 100% — every euro contributed within the cap reduces taxable income.

Layer four: private, unsubsidised options

Two further layers get no state subsidy at all, which is precisely what makes them flexible.

Private Rentenversicherung

A private Rentenversicherung is an insurance-based annuity contract you buy directly from an insurer, independent of any state scheme. There is no Grundzulage or Sonderausgaben deduction attached — you are simply buying a contractual promise of future income, usually with some guaranteed component. Only part of the payout is typically taxed, depending on your age when payments start and the contract type, but the product itself carries no state top-up. Costs and guarantees vary widely between insurers, which is exactly the kind of comparison worth doing through a licensed intermediary rather than taking the first offer.

ETF Sparplan

An ETF Sparplan — a regular automated investment into a low-cost exchange-traded fund — carries no subsidy and no special tax treatment beyond Germany’s standard capital gains rules (Abgeltungsteuer, the Vorabpauschale, and the annual Sparerpauschbetrag allowance). What it offers instead is full liquidity: no lock-in, no vesting, sell whenever you want. For anyone building retirement savings alongside — or instead of — the subsidized products, this is usually the most flexible building block, and often the cheapest over the long run once fees are accounted for. The mechanics of setting one up are covered in the ETF Sparplan starter guide, and how this fits into a broader plan by decade in how to save for retirement in your 20s and 30s.

Layer five: the 2027 reform — Altersvorsorgedepot replaces Riester

Germany’s private-pension subsidy system is getting its biggest overhaul in two decades. The reform passed the Cabinet on 17 December 2025, cleared the Bundestag on 27 March 2026, was approved by the Bundesrat on 8 May 2026, and entered into force at the end of May 2026 — with the new product itself available from 1 January 2027 (Bundestag; Bundesregierung).

The new vehicle is the Altersvorsorgedepot: a subsidized depot that can hold ETFs and funds rather than forcing savers into the guarantee-heavy insurance-style products Riester required. The capital guarantee is optional rather than mandatory, costs are capped at 1.0% per year, and the state adds a Grundzulage of 50% of the first €360 contributed plus 25% of the next €360.01–€1,800, for a maximum subsidy of €540 a year, plus a €300 Kinderzulage per child and a one-off €200 Berufseinsteigerbonus for savers under 25. Self-employed people are explicitly eligible, and payouts are taxed under nachgelagerte Besteuerung — the same deferred-taxation principle used elsewhere in the German pension system.

Compare all seven vehicles side by side

No English-language guide currently lines up every layer of the German private-pension system in one place. Here is the full comparison:

Vehicle	Who it suits	State subsidy / tax break	Flexibility / liquidity	Main drawback
Statutory Rente	Nearly all employees (mandatory)	Contributions increasingly deductible as Sonderausgaben; pension taxed on payout	None — no early access; voluntary top-up contributions possible	Not designed to fully replace pre-retirement income alone
bAV (workplace pension)	Employees with an employer scheme, especially with a strong employer subsidy	Tax-free up to 8% of the BBG (€8,112/yr, 2026); social-contribution-free up to 4% (€4,056/yr); ≥15% employer subsidy on Entgeltumwandlung	Locked until retirement age; vesting rules apply on job change	Illiquid; portion can be lost if you leave before vesting
Rürup / Basisrente	High-earning self-employed and freelancers	100% deductible as Sonderausgaben up to €30,826 single / €61,652 couple (2026)	None — lifelong annuity only	Cannot be cashed out, transferred, or (generally) inherited
Private Rentenversicherung	Those wanting a guaranteed insurance-based income stream, no subsidy strings	None (unsubsidised); only part of payout typically taxed depending on age/contract	Contract-dependent; surrender usually possible but often penalised	Costs and guarantees vary widely between insurers
ETF Sparplan (unsubsidised)	Anyone comfortable with market risk who wants maximum flexibility	None; standard capital-gains tax rules (Abgeltungsteuer, Sparerpauschbetrag) apply	Fully liquid — sell any time, no lock-in	No state top-up; full market risk, no guarantee
Altersvorsorgedepot (from 2027)	Anyone eligible for the subsidy, including the self-employed, wanting a low-cost ETF depot	Grundzulage up to €540/yr + €300/child + €200 one-off under-25 bonus; capital guarantee optional; cost cap 1.0%/yr	Deferred taxation on withdrawal (nachgelagerte Besteuerung)	Not available until 1 January 2027; providers still rolling out
Riester (legacy, closed to new contracts from 2027)	Existing holders only, going forward	Grundzulage €175/yr; Kinderzulage €300 (born 2008+) / €185 (before 2008); max €2,100/yr deductible	Existing contracts continue as before	Mandatory 100% capital guarantee historically limited returns

What happens to these pensions if you leave Germany

Liquidity and portability matter just as much as subsidies once you factor in that many internationals do not stay in Germany forever. The statutory Rente generally preserves your entitlement if you move within the EU/EEA or to a country with a German social security agreement, with more restrictions elsewhere — see the full breakdown in what happens to your Rente if you leave Germany. Rürup and bAV are the least portable of the private layers, since both are structured as illiquid, Germany-anchored products; an unsubsidised ETF Sparplan, by contrast, travels with you unchanged wherever you move, which is part of why it remains a popular baseline layer even for people who also use a subsidized product. For readers still deciding how much of their overall retirement plan should run through Germany at all versus a broader index-investing approach, FIRE: is it right for you and German tax classes (Steuerklassen) — relevant for self-employed Rürup savers checking their own Sonderausgaben deduction — are useful next reads.

Frequently asked questions

Do I have to pick just one of these pension types?

No. Most residents layer more than one — commonly the mandatory statutory Rente plus one subsidized product (bAV or, for the self-employed, Rürup) plus an unsubsidised ETF Sparplan for flexibility. The right combination depends on employment status, income, and how long you plan to stay in Germany.

Is the Altersvorsorgedepot better than Riester?

It is structurally different rather than simply “better” in every case: the capital guarantee becomes optional instead of mandatory, costs are capped at 1.0% a year, and it allows a higher-equity, ETF-based portfolio that Riester’s guarantee requirement generally prevented. Whether that structure suits a given saver depends on risk tolerance and time horizon — compare options via a licensed intermediary once the product launches on 1 January 2027 rather than assuming one is automatically superior.

Can self-employed people get a state-subsidized pension in Germany?

Yes. Rürup/Basisrente is built specifically for high earners without access to employer-linked subsidies, and the incoming Altersvorsorgedepot explicitly includes self-employed savers among those eligible for the Grundzulage from 2027.

What happens to my existing Riester contract after the reform?

It keeps running under its existing terms. The reform stops new Riester contracts from being opened from 1 January 2027; it does not cancel or change contracts that already exist.

When exactly does the 2027 pension reform take effect?

The law passed the Bundestag on 27 March 2026, was approved by the Bundesrat on 8 May 2026, and entered into force at the end of May 2026. The new Altersvorsorgedepot product itself becomes available to savers from 1 January 2027.

This article is for general information only and does not constitute financial, tax, or legal advice. Contribution ceilings, subsidy amounts, and deduction limits change annually and vary by individual circumstances; the figures above are illustrative and current as of mid-2026, not a personalized recommendation. Compare current private pension options via a licensed intermediary such as Tarifcheck before making a decision. Alle Angaben ohne Gewähr.