German BMF accepts ECJ ruling on Riester

GERMANY/EUROPE - The European Courts of Justice (ECJ) ruled today that Germany was violating European Union regulations on freedom of movement with parts of its law on the state-subsidized supplementary Riester pension.

"With the ruling, existing questions about who can be beneficiaries of the Riester-Rente system have been settled," the German ministry of finance (BMF) said in a statement.

For Germany this means "legal certainty" on the issue and the federal government will study the ruling and "see to it that the court's findings will be implemented promptly".

However, the BMF stressed that the ECJ had not questioned the Riester system as such, only parts of it regarding cross-border workers.

"This is good news for the 12.5 million people who have already signed a Riester contract," the BMF noted.

In this ruling the court is following the opinion of the Advocate General voiced in April. (See earlier IPE article: Germany faces Riester changes)

The court noted that "by introducing and maintaining the provisions for complementary pension" (i.e. Riester) in its Federal Law on Income Tax, Germany "has failed to fulfil its obligations" under various EC articles "on freedom of movement for workers within the community".

These laws were violated by three provisions under Riester legislation, namely:

Denying "cross-border workers and their spouses the right to the savings‑pension bonus, unless they are fully liable to tax" in Germany Prohibiting "cross-border workers from using the subsidised capital for the acquisition or construction of an owner-occupied dwelling unless the property is situated in Germany" The fact that the bonus paid on the Riester-Rente is to be paid back "on termination of full liability to tax" in Germany.

Germany will also have to pay the costs of the court proceedings.