The German Pension Depot: It's Official! ETF Power for Expats in Germany

It is official: The German Bundestag passed the new Pension Reform Act on March 27, 2026, and the Bundesrat gave its final approval on May 8, 2026. Starting January 1, 2027, the new Pension Depot (Altersvorsorgedepot) will revolutionize private retirement savings with a high-yield investment model and state-supported flexibility.

Maria's Story: Why waiting for 2027 is worth it

Fictional example for illustration; all persons and events are invented.

Maria is a 32-year-old expat working in IT. She wanted to save for her retirement in Germany but was unhappy with traditional pension insurance options. "The costs are too high, and the growth is limited because of mandatory guarantees," she noticed.

With the new Pension Depot reform, Maria can finally save using a modern approach. Instead of paying for expensive insurance wrappers, her money goes directly into a global ETF portfolio. The German state still supports her with subsidies, but Maria decides how her money is invested. For Maria, this means much higher potential returns when she retires, simply because high contract fees and unnecessary guarantee costs are gone.

The Pension Depot: High-Yield Subsidized Investing

The new Pension Depot offers a modern, flexible, and investor-centric subsidy system. By removing high cost barriers and rigid rules, it provides expats with a powerful way to build retirement wealth using low-cost global ETFs.

• Three Guarantee Options: Savers can choose between 0%, 80%, or 100% guarantee. The 0% option allows for 100% ETF exposure to maximize long-term market returns.
• New Subsidy Model: You receive a 50% subsidy on your first €360 invested (max. €180), and 25% on further contributions up to €1,800. This equals a maximum basic grant of €540 per year.
• Child Grant (100% Match): For every Euro invested for child-related savings, you get a 100% grant (up to €300 per child).
• Young Professional Bonus: If you are under 25, you receive an extra €200 one-time state bonus.
• Tax Advantages: Contributions of up to €1,800 per year (plus your subsidies) are tax-deductible as special expenses. In total, you can pay in up to €6,840 per year; dividends and capital gains are not taxed during the savings phase.
• Flexibility & Payout: Payouts can start at age 65. You can choose between a lifelong annuity or a flexible withdrawal plan running at least until age 85.
• Full Portability: Transfer existing accumulated subsidies and capital from older contracts into the new depot without losing state support.
• Inclusion of Freelancers: For the first time, self-employed professionals and freelancers are fully eligible for state subsidies.

Taxation at Retirement (Payout Phase): Payouts are taxed under the deferred taxation system. The subsidized part of your capital (contributions up to €1,800 and state bonuses) is taxed at your personal income tax rate, which is usually significantly lower in retirement than during your career. For the unsubsidized part (contributions above €1,800 up to €6,840), the favorable "Ertragsanteil" taxation generally applies: only a small, age-dependent share of the earnings is taxed.

Good to know: The German government uses "Pension Depot" (Altersvorsorgedepot) as the overarching term for this new category. While the individual depot offers maximum flexibility with free ETF choices, the Standard Pension Depot is designed for simplified, low-cost default investing, though without free fund choice. The provider presets a standardized portfolio (usually one equity and one bond ETF). Pension contracts with guarantees provide protection for safety-conscious savers (securing 80% or 100% of contributions), but their guarantee costs significantly lower the long-term returns. As your legal fiduciary representative, I will help you assess your risk profile and select the optimal model. Through my status as a neutral insurance broker, I stand legally on your side (client status).

Costs and Subsidies of the Pension Depot

Why is the Pension Depot so attractive? In addition to the simplified and generous state subsidies, the primary advantage is its cost structure. While conventional pension insurance policies often reduce returns through expensive guarantee requirements and high contract fees, the new Pension Depot allows for a highly cost-effective 100% investment in low-cost ETFs. Use the calculator below to determine your personal state subsidies:

Certification and Security of the New Depot Solution

A key component of the 2027 reform is state certification. Only providers that meet strict criteria are allowed to offer the Pension Depot. This ensures that the products remain transparent and low-cost. There are two primary options: the Standard Depot for savers seeking a pre-configured solution, and the individual Depot for informed investors.

It is important to understand that security is no longer achieved through expensive guarantees that lock up your capital. Instead, security is based on scientifically proven diversification and long time horizons. Those who have 20, 30, or 40 years can ride out market fluctuations and benefit from significantly higher purchasing power in old age.

Payout Plan or Lifelong Annuity?

A major criticism of earlier state-subsidized pension models was the mandatory annuitization. The new Pension Depot offers much more freedom. From 2027, you can choose whether you want to receive your capital as a lifelong annuity, which remains possible through insurers, or opt for a flexible withdrawal plan running at least until the age of 85. The latter allows you to access larger sums in the first phase of retirement while the remaining capital continues to work in the depot.

Requirements for Expats

• Valid German Address (Anmeldung)
• German Bank Account (IBAN)
• German Tax ID
• Tax Residency: You must live and pay taxes in Germany to get the immediate tax benefits and subsidies.
• Social Security: You are usually an employee or a required member of the German state pension system.
• Residence Permit: You have a valid residence permit or plan to stay in Germany for a long time.
• No Refugee Status: These subsidies are for regular residents and workers. Different rules apply for other statuses.

Limits and Drawbacks

The Pension Depot is a big improvement over Riester. You should still know these limits:

• Locked until retirement: Payouts start at age 65 at the earliest and 70 at the latest; before that you can only access the subsidised balance in exceptional cases.
• Harmful use: If you withdraw the balance outside the permitted cases, you must repay subsidies and tax benefits.
• Market risk: Without a guarantee, the value fluctuates with the markets. If you want security, choose a guarantee product with 80% or 100% guarantee, but you give up return potential.
• Deferred taxation: Contributions up to €1,800 plus subsidies are tax-deductible, but the payout is taxed in retirement.
• Switching costs: When transferring a Riester contract or switching providers later, switching and acquisition costs may apply.

Neutral Market Comparison for the 2027 Reform

The new Pension Depot follows a clear philosophy for your private pension planning: Low costs, high transparency, and robust state support. Since this reform was recently passed, many financial products are currently in development. Starting early ensures your retirement planning is ready to benefit directly in 2027.

As an insurance broker (§ 34d GewO), I compare the insurance-wrapped variants of the Pension Depot and the insurers' guarantee products from a broad market selection (Marktauswahl), and I make sure you receive the full state and child subsidies. The pure securities depot without an insurance wrapper is offered by banks and fund companies; I explain its subsidies and differences, but I do not broker it.