The approved reform of private old-age provision introduces a new funding structure from January 2027, which increasingly considers home ownership as a central pillar of private old-age security. This innovation aims to position the building savings contract more significantly as a financing component. It will enable higher state subsidies and expanded funding opportunities for individuals who aspire to live rent-free in old age. For the first time, self-employed persons, freelancers and tradespeople will also be included in the group of eligible beneficiaries, significantly broadening the target group for the funding.
Basic allowance and its calculation
The reformed model provides for a proportional basic allowance, the amount of which is based exclusively on the actual savings contributions made, regardless of the saver's income. For every Euro saved privately for old-age provision, the state contributes an additional 50 cents, up to an annual amount of 360 Euros. For further deposits up to a maximum of 1,440 Euros, 25 cents will be granted per Euro deposited. This means that with a personal contribution of 1,800 Euros, an additional basic allowance of 540 Euros per year can be generated. A special incentive is created for young employees: those who start saving before their 25th birthday will receive a one-off career starter bonus of 200 Euros.
Another innovation concerns the child allowance, which is now granted regardless of the child's age. For every Euro saved, a child allowance of one Euro is provided, with deposits up to 300 Euros per child being subsidised with an allowance of also 300 Euros. This substantially strengthens the funding, especially for families. Kathrin Hartwig from LBS clarifies that with monthly savings contributions of 25 Euros, the state doubles the amount to 50 Euros. A family of four with two eligible building savings contracts could thus receive a total of 1,680 Euros per year through basic and child allowances. Together with the required personal contribution of 3,600 Euros, this leads to an annual increase in equity of 5,280 Euros.
Building savings in focus: Combination of funding and interest rate security
The new old-age provision funding highlights the potential of the building savings contract, especially in conjunction with the home equity pension scheme. Building savings contracts offer a combination of state funding with a loan interest rate fixed from the outset. This allows for reliable calculation of financing costs over long periods, irrespective of future interest rate developments on the capital market. The state subsidies have a dual effect, both in the savings and in the loan repayment phase, where they can accelerate debt reduction as a 'repayment turbo'.
For existing Wohn-Riester contracts, the previous funding remains in place. Customers have the choice of whether they wish to remain in the existing model or switch to the new funding. According to Kathrin Hartwig from LBS, this decision can be made at leisure from next year. The realignment of the funding explicitly pursues the goal of enabling rent-free living in old age through the acquisition or renovation of residential property. The subsidised funds can be used not only for acquisition but also for energy-efficient renovations or age-appropriate conversions. This flexibility underscores the relevance of home ownership as a fundamental component of private old-age provision.
