Germany introduces a new children's pension savings system

The German Bundestag passed a bill on October 16 to introduce a state early-start pension program for children. It provides for monthly contributions from the federal budget to individual investment accounts of minors.

This is reported on the official website of the German parliament.

The bill was supported by deputies of the ruling coalition CDU/CSU and the Social Democratic Party. Representatives of the Greens and the Left Party voted against it, and the Alternative for Germany deputies abstained.

The program provides that the state will monthly transfer 10 euros to a special pension account of a child. Funds will be invested in the financial market, and savings will be formed through regular contributions and investment income.

The first participants of the early-start pension program will be children born in 2020. For them, state contributions will be accrued retroactively from January 1, 2026. The first actual transfers are scheduled for 2027. At the same time, children born in 2021 will join the program. In the future, it will be extended annually to the next generation of six-year-olds.

To receive contributions, parents may open a special savings account at a certified financial institution. If they do not do so, the state will invest the money through a collective fund managed by the German Bundesbank. Later these savings may be transferred to an individual account.

Parents and other relatives may also supplement the account with their own funds — up to 6840 euros per year. Investment income will not be taxed during the accumulation period. To use the state pension savings, as a general rule, one may only after reaching 65 years of age.

The program can be extended to children of Ukrainians living in Germany. Under the terms of the bill, the right to state contributions is determined by the age of the child and the presence of main residence in Germany, not by its citizenship. Thus, Ukrainian children of respective birth years may also be eligible for participation if the requirements are met.

There were also disputes in parliament regarding the limited coverage of the program. Opposition deputies criticized the decision not to provide state contributions to children born before 2020, as well as the possibility of well-off families significantly increasing savings through additional contributions.

The bill adopted by the Bundestag still has to complete the legislative procedure, in particular to be considered in the Bundesrat. Entry into force is scheduled for January 1, 2027.

Based on materials from: Bundestag of Germany, Federal Ministry of Finance of Germany