Bundestag approves €10 contributions to children’s pension savings — Interia

In Germany, the Bundestag has approved a law on the “Pension at the Start” (Frühstartrente) programme, which provides for monthly state contributions of €10 toward children’s future pension savings. As Interia reports, the law is expected to enter into force in January 2027, provided it is approved by the Bundesrat.

Who will be eligible for contributions

The law provides for coverage of children born from 2020 onward. The state will transfer €10 per month from the time a child turns six until they reach the age of 18.

Starting in 2027, children turning six in the respective calendar year will join the programme annually. According to the source, children who are already seven or older will not receive payments.

Parents will be able to choose an account to receive the funds. If they do not do so, the contributions will be directed to a collective investment managed by the Bundesbank. Parents and grandparents will also be able to make voluntary contributions of up to €6,840 per year.

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Investments and risks

Until adulthood, no fees will be charged for concluding an agreement or servicing the savings. The funds will be allowed to be invested only in broadly diversified global equities or equity funds. After reaching adulthood, the savings will be transferred to a private pension programme with tax benefits.

According to the Finance Ministry, the funds generally cannot be withdrawn before the age of 65. The ministry estimates that state contributions made until the age of 18 will make it possible to accumulate about €2,200. If this money remains invested without additional contributions, its value could grow to approximately €53,000 by the age of 65.

According to the ministry’s calculations, with an additional parental contribution of €10 per month, the capital could reach about €107,000, while a contribution of €50 could raise it to €320,000. These examples are based on an assumed average annual return of 7%. The ministry warned that actual returns may be either higher or lower, and that the state will not compensate losses in the event of unfavourable conditions on financial markets.

The programme’s initial budget costs are estimated at approximately €198 million per year, and they could rise to €411 million by 2030. Critics of the initiative point out that children from families able to make additional contributions will benefit the most.