Germany's New Retirement Account + 4 Others Nobody Explains

Germany lets you legally cut your tax bill, and even adds money to your retirement savings. Almost nobody explains it in English. Here are the five accounts that matter, the German terms you need, the 2026 numbers, and the new depot from 2027.

In Germany, you can legally lower your tax bill, and the government will even add money to your savings, just for putting money aside for your future. Most people who live here have no idea, and almost nobody explains it in English. I've lived in Germany for over twelve years, and in this guide I'll break down the five accounts that matter, in plain English, with the German words you actually need.

Here's the lineup. One, the workplace pension, the bAV. Two, the Basisrente, also known as Rürup. Three, ETF savings plans plus the tax-free allowance. Four, an employer benefit called VL. And five, a brand-new account, the Altersvorsorgedepot, which starts on January 1st, 2027, and replaces Riester for new contracts.

One important thing first: I'm not a tax adviser, and this is not financial advice. This is general information to help you understand your options and ask better questions. Investing involves risk, and the value of investments can go down as well as up. For your own situation, talk to a tax adviser, a Steuerberater, or a fee-only adviser, a Honorarberater. US citizens: see the note near the end.

Why almost nobody explains this

Three reasons. First, the terms are German and long: Entgeltumwandlung, Freistellungsauftrag, vermögenswirksame Leistungen. If you moved here as an adult, nobody sat you down and translated them. Second, your employer may offer something, but unless you ask, it stays quiet. Third, the system is split into lots of small pieces, with no single place that lists your options. So people either do nothing or sign whatever a salesperson puts in front of them. This is the map.

The three layers of German retirement

German retirement has three layers. Layer one is the statutory pension, the gesetzliche Rente: as an employee, you and your employer pay into it from every paycheck, and for most people it won't replace their full income. Layer two is the workplace pension, the bAV. Layer three is private savings, from a Basisrente to a simple investment account. The state wants you to build layers two and three, which is why it hands out tax breaks and subsidies. The gap between what the statutory pension pays and what you actually want to live on has a name, the Rentenlücke (pension gap), and these five accounts are the tools people use to close it.

Three ways Germany rewards saving

Hold on to one idea for the whole guide: Germany rewards saving in three ways. It can lower your taxes now (set money aside before income tax, or deduct contributions, so your taxable income drops). It can add money from the state (a subsidy on top of what you pay in, with rules attached). And it can let you keep more of your gains (a tax-free allowance or partial exemption on growth). Every account below uses one or more of those three, and the trade-off is usually flexibility: the more the state helps, the more rules come with it.

One tax idea makes everything easier: your top tax rate, the marginal rate. German income tax is progressive, so a deduction is worth your top rate, not your average one. That's why the same strategy is worth more to a higher earner, and why you can't just copy a friend's plan. On your payslip, you'll see gross pay (Brutto) and net pay (Netto); everything here changes the gap between those two numbers.

1. The workplace pension (bAV)

If your employer offers it, you can put part of your salary into a pension before income tax, and up to a limit before social-security contributions too, so you give up less take-home pay than the amount you actually save. The official name is betriebliche Altersversorgung, and the process is Entgeltumwandlung, converting part of your gross salary into a pension contract through your employer. The part many people miss: if you convert salary and your employer saves on social contributions, the law requires the employer to add 15 percent. Not every employer explains this, so ask. The catch: payouts are taxed in retirement and usually carry health and care contributions, and because your gross salary is lower while you save, your statutory pension can end up slightly lower. It's a trade, not magic.

So the first question isn't whether a bAV is good in general. Ask HR three things: Do you offer a bAV? What do you add on top? And what does the provider charge?

2. The Basisrente (Rürup)

If you're self-employed, this is the one you'll hear about most. Your contributions are tax-deductible up to a high limit, but your money is locked away until retirement. A Basisrente is a private annuity: you pay in, deduct contributions on your tax return as special expenses (Sonderausgaben), and later receive a lifelong pension. For 2026 you can deduct up to €30,826 as a single person, €61,652 as a couple, and since 2023, 100 percent of contributions count. As an illustration, not a real case: at a 40 percent top tax rate, paying €10,000 into a Basisrente could save roughly €4,000 in income tax. The trade-off: the money is locked, no early withdrawal, no lump sum, only a lifelong annuity. It usually suits high earners and the self-employed with a stable income. Before you consider it, ask one question: can I live without that money until I retire?

3. ETF savings plan + the tax-free allowance

The most flexible option needs no employer, no special contract, and no lock-in: a regular ETF savings plan (a Sparplan, a fixed amount invested automatically each month) combined with the Sparer-Pauschbetrag. Every adult gets a tax-free allowance on investment income: €1,000 a year single, €2,000 a couple. To use it, give your broker a Freistellungsauftrag (an exemption order), a simple online form; without it, the broker withholds tax from the first euro. There's a second advantage: equity funds get a 30 percent partial exemption, the Teilfreistellung, so only 70 percent of the gains from a fund holding at least 51 percent in shares are taxed. Above the allowance, gains are taxed at about 26 percent (plus church tax if you pay it). And the big difference from every other account on this list: you can sell any time. Worth checking today, if you have a German broker account, is your Freistellungsauftrag set up?

4. VL: the small benefit on your payslip

VL, vermögenswirksame Leistungen, is a monthly amount your employer pays into a savings product you choose. Whether you get it depends on your contract or collective agreement. Separately, you can get a state savings bonus, the Arbeitnehmer-Sparzulage, if your taxable income is under €40,000 single or €80,000 as a couple: for equity funds it's 20 percent on up to €400 a year (max €80), for a building-savings contract 9 percent on up to €470 (max €42.30). The catch: you have to leave the money in for seven years to keep the bonus, and the VL payment itself counts as taxable pay (only the bonus is tax-free). It's a small number, but if your employer offers it and you qualify, it's worth knowing about.

So open your last payslip, your Gehaltsabrechnung. You'll see gross (Brutto) at the top, net (Netto) at the bottom, and in between your deductions: income tax (Lohnsteuer) and social contributions. Look for extra lines. "Vermögenswirksame Leistungen" means your employer is already paying VL. "Entgeltumwandlung" means you may already have a bAV. If you see neither, it usually just means nobody has set them up.

5. The new Altersvorsorgedepot (from 2027)

On January 1st, 2027, Germany launches the Altersvorsorgedepot, which replaces Riester for new contracts and comes with a state subsidy of up to €540 a year. The headline is a maximum, not a promise. The state matches your contributions in two steps: on the first €360 you pay in, it adds 50 percent (€180); on the next €1,440, up to €1,800 total, it adds 25 percent (€360). To get all €540 you have to pay in €1,800 yourself, which is €150 a month. There are extras: up to €300 per child per year, and a one-time €200 bonus if you open the account before your 25th birthday.

It's a retirement investment account. Per published guidance you'll be able to invest up to 100 percent in equity funds with no guarantee required (a big change from Riester), the standard product's costs are capped at 1 percent per year, the self-employed can qualify (new), and payouts start between 65 and 70 with the option to take up to 30 percent as a lump sum. Providers are still being approved, so treat this as the current picture, not the final word. And if you already have a Riester contract, nothing changes: it continues as is, there's no automatic switch, so don't cancel anything over a headline.

All five side by side

None of these is best at everything. Each is a trade-off between flexibility, help from the state, and simplicity. The bAV gives you tax and social-security savings but is designed for retirement. The Basisrente gives a big deduction but locks your money away. The ETF plan gives an allowance and partial exemption with no lock-in. VL gives a small bonus if you qualify and hold seven years. The depot gives a subsidy for retirement saving.

Who it usually suits

These are general patterns, not recommendations. If you're an employee, start with your employer: bAV and VL. If you're self-employed, you have no employer plan, so people usually look at the Basisrente, flexible investing with the allowance, and, from 2027, the depot (which the self-employed can use). If you're a high earner, the Basisrente's deduction matters more because the effect grows with your tax rate. And for everyone, the ETF savings plan with the exemption order has no lock-in. The right mix depends on your income, your plans, and how long you expect to stay. We walked through the broader saving-vs-investing picture in why Germans don't invest, and the self-employed pension question in the freelancer pensions breakdown.

A note for Americans

If you're a US citizen, the US still taxes you on your worldwide income wherever you live, and there are extra US reporting and tax rules that can apply to foreign accounts and to funds based outside the US. That can change how a German account works out for you, sometimes a lot. Before you open anything, talk to a tax professional who knows both the US and German systems.

If you leave Germany

Many people who move here don't stay forever, so ask before you sign: what happens to this contract if I leave Germany? The answer depends on the product and can also depend on your visa, employer, and tax situation. Ask the provider whether you can pause payments, what it costs to stop, and what happens to the money if you move abroad, and get the answer in writing.

Five questions, five mistakes

Take these five questions to HR or an adviser: Does my employer offer a bAV, and what does it add? Does my contract include VL, and where is it paid? What are the fees on this product? Can I get my money out early, and what does that cost? And what happens to this account if I leave my employer or leave Germany? Write them down.

And the five mistakes people make: not using the tax-free allowance (no Freistellungsauftrag, so you pay tax you didn't need to); assuming the €540 subsidy is automatic (it's a maximum, you have to pay in €1,800); locking away money you might need; ignoring what your employer already offers; and signing under pressure. If someone says you have to sign today, that's your signal to slow down and ask for everything in writing.

What to do this week

1. Open your payslip and employment contract and look for bAV and VL. A benefit with an employer contribution can be sitting there unused.

2. If you invest, check your Freistellungsauftrag is set up with your broker. It takes a few minutes and saves tax on the first €1,000 of gains.

3. Send HR the five questions above, and keep every yearly statement in one folder for your Steuerberater.

4. Bookmark January 2027, when the first Altersvorsorgedepot providers go live, and compare what they charge before you commit. If your situation is complex, book an hour with a Steuerberater or fee-only adviser.

Want this on one page? Our free German retirement cheat sheet puts all five accounts and the 2026 limits in one place, and the US vs Germany cost-of-living calculator helps you plan the bigger picture.

Disclosure: the Feather Insurance link in this article is an affiliate link. If you sign up through it, I may earn a commission at no extra cost to you, which helps support the channel. I'm not a tax adviser and this is not financial or tax advice, just general information to help you ask better questions. Figures are for 2026 and the rules can change, so check your own situation with a Steuerberater or a fee-only Honorarberater. US citizens should consult a professional who knows both the US and German systems.