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In my occupational pension scheme (VBL) I can, in addition to the legally required private pension insurance (VBL klassik), opt-in to extra private pension insurance (VBL extra). The latter is apparently sponsored / tax-deductible up to a certain maximum, such that the government effectively adds ~8% on top of what people put in. If I understand correctly, this sponsorship is called Riester-Rente. Sounds good to me.

However, on the German language Wikipedia, there is a long article with criticism of the Riester-Rente, for example, that most people would lose money unless they become much older than the life expectancy. I don't understand why that is a problem; that should be a feature of any insurance, where a pension insurance is an insurance against running out of money due to becoming too old. Can I really be worse off with extra private pension insurance (such as VBL extra) with a government subsidy (such as Riester-Rente) than extra private pension insurance without such subsidies? The article also quotes the head of a federal consumer organisation that the scheme was gut gemeint gewesen, aber grottenschlecht gemacht (well-intended, but very poorly implemented).

What is the problem with Riester-Rente?

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  • Have you considered working with a financial planner to help you make this decision? Commented Oct 3, 2022 at 1:51
  • @BrianBorchers Yes, I am considering this. But my question here is generally about the Riester-Rente.
    – gerrit
    Commented Oct 3, 2022 at 7:33

2 Answers 2

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The problem with most of these contracts are the high costs. Combine that with the fact that the providers are obliged to guarantee that at the time of retirement, at least the paid amount will be available ("Beitragsgarantie").

In order to be able to do this, they are not able to invest much of the money in e. g. ETFs, so that the returns remain low.

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I agree with glglgl: From an insurant's perspective many Riester (insurance!) products come with high cost.

It's not unusual that you pay 5 % of your premiums as acquisition costs. These costs are forecasted on the total sum of your expected premiums until retirement and deducted from your premiums in the first 5 years. So the impact of the costs is amazing at the beginning which leads to a negative yield in the first years and seriously damages the "interest on interest effect".

Even worse, expect to pay 2 % annual management fee on your accumulated funds. As a result the yield on your Riester premiums will be low compared to the market. But the federal subsidies and tax reductions may still be very beneficial for many people.

In contrast, there are alternative Riester products with low costs. Some banks used to offer Riester saving plans on a classical saving account. Here costs are low (if any), but interest rates will be bound to the interests on the financial market (which used to be 0% in the past years). Still, positive effects through subsidies and tax reductions also apply here.


From an insurer's perspective, many of them complain about bureaucracy in regards to applications for the subsidies. IMO they earn dramatically well on Riester products ...

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