Germany’s parliament has approved legislation introducing state-funded retirement savings accounts for children, as the government seeks to expand capital-funded pensions and address long-term social inequalities.
On 16 October, the Bundestag passed the Early Start Pension (Frühstartrente) law with the support of the Christian Democratic Union (CDU), Christian Social Union (CSU) and Social Democratic Party (SPD). The Greens and The Left voted against the legislation, while the far-right Alternative for Germany (AfD) abstained.
From 2027, the Central Office for Retirement Provision (ZfA), a division of statutory pension provider Deutsche Rentenversicherung, will pay €10 a month into a capital-funded retirement savings account (Altersvorsorgedepot) for eligible children born in 2020, when they turn six.
The state contributions will continue until the children reach the age of 18.
Parents can open accounts with private providers and make additional contributions of up to €6,840 a year.
If parents do not select a private provider, the monthly €10 contributions will flow into a dedicated special fund (Sondervermögen Frühstartrente), to be established on 1 January 2028 and managed by Germany’s central bank, Deutsche Bundesbank.
Under the law, assets in the special fund will be invested “exclusively in broadly diversified global equities or equity funds”.
This is intended to ensure that “no other political objectives are pursued through the investment of these funds”, according to the legislation.
Once children reach 18, their savings can be transferred to private retirement accounts made available under the reform of Germany’s third-pillar pension system, which is due to take effect next year.
The scheme marks another step in the government’s efforts to strengthen capital-funded retirement provision in Germany.
The government expects the Frühstartrente to help reduce social inequalities over the long term.
