The Bundestag will decide this Friday on the early start pension planned by the federal government. After a debate, parliament is to vote on the bill, as the Bundestag announces on its website. The plan is for the state to pay ten euros a month into a funded retirement savings account for children and young people aged six to 18. The subsidy is to apply retroactively from 1 January 2026, but the first money will not flow until 2027, as the German Pension Insurance announced after the cabinet decision.
The early start pension begins with the 2020 birth cohort – that is, the children who turn six this year. According to the Federal Statistical Office, around 770,000 babies were born in Germany in 2020. From 2027, the birth cohort of those turning six in the respective calendar year will be included each year. Older children can also receive an account, but do not receive state contributions. Green MP Stefan Schmidt called this restriction “simply unjust” at the first reading. The insurance industry also demanded at the hearing that all cohorts be supported. The coalition is sticking to the phased plan, partly because of the costs: 198 million euros in 2027, 411 million euros in 2030.
How does the early start pension work in practice?
Parents can choose a certified provider and open the account online – advice is not mandatory. Until the child reaches adulthood, no acquisition or distribution costs may be incurred, and a cost cap of one per cent applies. Anyone who does not open an account automatically ends up in a state collective pot: from 1 January 2028, the Bundesbank will invest the payments in a special fund. The Finance Committee has tightened the rules so that the money may only flow into broadly diversified global equities or equity funds. This is intended to rule out the possibility of politicians using the capital for their own purposes.
The accumulated assets can later be transferred into a person’s own certified retirement provision contract. Anyone who does not transfer the money from the Bundesbank pot loses it: according to the Bundesrat’s statement, the funds are to expire on the holder’s 35th birthday. In the first draft, the limit was even 25 years. The federal states demand that those affected be written to again shortly before the deadline expires. The federal government has promised to examine this – it has not yet been enshrined in law.
Parents and grandparents can top up the account with their own contributions of up to 6,840 euros per year. However, no further tax advantages are envisaged for these additional contributions. The Federation of German Consumer Organisations already considers the 6,840 euros far too high: wealthy families in particular would benefit, the consumer advocates warned at the hearing.
What does the government promise – and what do critics say?
Finance Minister Lars Klingbeil (SPD) stressed at the first reading that the state subsidy alone could grow to 53,000 euros by retirement age. If parents and grandparents add 20 euros a month, a sum of 160,000 euros could be reached. Berliner Zeitung did the maths: the 53,000 euros assume a return of seven per cent per year over almost six decades with no costs. At six per cent it would be a good 32,000 euros, at five per cent around 19,000 euros – and inflation would eat up a large part of that.
According to calculations by the Federal Ministry of Finance, the state subsidy alone produces an account value of around 2,200 euros by the time the child reaches adulthood. Dorothea Mohn of the Federation of German Consumer Organisations considers a sum of around 2,000 euros realistic with good performance. In her view, however, what matters is what happens afterwards: the early start pension is only a first building block. When young adults enter working life, they must continue to pay into the account with their own contributions. “Only then can one assume that a genuinely good supplementary pension will come out of it,” Mohn told MDR.
The German Trade Union Confederation calls the early start pension a con. “It is not a pension and conceals the social and ethical risks of the capital market,” a statement says. It should therefore be rejected. The Left Party speaks of “private customer acquisition at the taxpayer’s expense”. The CDU/CSU and SPD, by contrast, see a milestone. CDU MP Mathias Middelberg pointed to the long-term opportunities of the capital market and the effect of compound interest.
The German Banking Industry Committee welcomes the plans. The early start pension supplements the planned retirement savings account with an offering for children and young people and makes it easier to start funded retirement provision early, a statement said.
The law is to enter into force at the beginning of January 2027. The Bundesrat must also approve the draft. As long as the Bundestag and Bundesrat have not given their approval, there are no certified early start pension accounts. Anyone now offered a contract as a “children’s pension” should check carefully whether it is the subsidised product.
