Riester books: switch or hold? The honest analysis

From 2027 an existing Riester contract can be paid into unchanged, converted to the new subsidy regime, made paid-up, or transferred in full into an Altersvorsorgedepot. Which of those four options fits is decided by the individual contract: remaining term, costs, guarantees and allowance history differ considerably. Switching advice that always arrives at the same conclusion is not advice, and it would not survive supervisory review.

Four options, not two

The public debate mostly knows two states: keep Riester or get rid of it. The act and contract practice know four, and the two in the middle are routinely overlooked in advice conversations, even though they are often the better answer.

1. 01

   Carry on unchanged

   The Riester contract continues to be paid into unchanged and the old subsidy logic stays in place. It is the only option that preserves that logic, and for households receiving high allowances on a small own contribution it is often the economically strongest.

2. 02

   Keep the contract, take the new subsidy

   The existing contract stays in force but moves onto the Altersvorsorgedepot's subsidy regime: a €540 basic allowance proportional to contributions, €300 per child. The old contract's guarantees, annuity factor and cost structure are untouched. The underrated case: a good old contract with a poor allowance ratio.

3. 03

   Make paid-up and save alongside

   The old contract is left dormant, its guarantees remain, and new contributions go into an Altersvorsorgedepot. Important: this variant does not preserve the old subsidy logic (see below), which is regularly presented incorrectly in advice.

4. 04

   Full transfer

   The old contract is terminated for the purpose of a subsidy-neutral transfer, usually with three months' notice to the end of a quarter, and the capital moves directly from provider to provider into the Altersvorsorgedepot. Allowances already granted are retained.

The automatic effect many miss

The third option sounds like the safe middle course: leave the old contract dormant, save in the new account, lose nothing. Tax law sees it differently. Under § 52(50a) EStG the subsidy declaration is irrevocable and applies uniformly to every retirement provision contract a person holds; taking out a new contract from 2027 converts the existing ones by operation of law, even without an explicit declaration. The effect extends to a spouse as well.

In practice that means only the first option leaves the old subsidy logic untouched. Anyone who takes out a new contract has made the decision for the whole portfolio, for themselves and, where applicable, for their spouse. That is why § 7d AltZertG requires a notice covering exactly these legal effects before a subsidy declaration is made or a contract concluded.

When holding is the right recommendation

There are constellations in which a switch leaves the customer worse off, regardless of how good the new product is. They can be named:

• A short remaining term. The closer the retirement date, the less time remains to earn back transfer costs and market swings.
• A high allowance ratio in the old contract. Anyone receiving large allowances on a small own contribution, typically low-income households with several children, loses out under a subsidy proportional to contributions.
• A high guaranteed interest rate. Older cohorts carry terms that can no longer be bought in the market. Incidentally: Riester contracts with a four per cent guaranteed rate do not exist, the maximum technical interest rate was never above 3.25%.
• A guaranteed annuity factor, particularly in contracts from before 2012. On a transfer it is gone, with nothing in its place.
• Embedded occupational disability or survivor components. A new contract means new medical underwriting, with an uncertain outcome.
• A running Wohn-Riester repayment, or a retirement date planned before 65, because payouts from the Altersvorsorgedepot start at 65 at the earliest.
• An explicit wish for a lifelong annuity. A drawdown plan ends, an annuity does not, that is a question of preference, not of arithmetic.

“Hold” is a recommendation too. It goes through the same comparison and is documented in the same record.

What a switch costs

When switching provider on a Riester contract, the transfer costs are capped by law at €150: on the ceding side for contracts running less than five years, and on the receiving side as a one-off flat charge. What always governs is the wording of the specific contract; a serious analysis reads that item out of the documents and shows it openly in the comparison rather than estimating it.

More important than the transfer costs is a way of thinking that is often missing in advice conversations: acquisition and distribution costs already paid are sunk. They do not come back whichever option is chosen, and they are therefore no argument against switching. What decides is solely what the contract still costs from today onwards.

Guarantees cut both ways

A contribution guarantee only takes effect at the start of the payout phase. If a contract is transferred before then, the current market value applies: any loss is realised, and the guarantee lapses with nothing in its place. Current value and guaranteed value therefore belong side by side in the advice record, not just one of them.

The opposite direction is told less often. In the receiving contract, the transfer value counts as the new guaranteed balance; gains as well as losses are locked in. Where today's value exceeds the contributions paid in, a transfer lifts the guaranteed floor, for customers with a strong need for security, a real advantage of switching that the standard argument usually leaves out.

What the process has to deliver

A Riester switch touches two supervisory regimes at once: the ceding insurance side under §§ 61, 62 VVG and the receiving securities side under § 64 WpHG (or § 18 FinVermV). Both sides have to be documented, and at the heart of the suitability statement sits a cost-benefit analysis of the switch with an explicit conclusion on whether the advantages outweigh the disadvantages, including the alternatives considered.

Alongside that come mandatory warnings that are not footnotes: the irrevocability of the subsidy declaration and its effect on every contract, the point at which a guarantee takes effect, the loss of the annuity factor and death benefit, the longevity risk in a drawdown plan, and the explicit statement that nobody has to switch. For this use case, waiving advice should be ruled out as a matter of distribution policy.

Why this is a volume problem

Germany holds around 15 million Riester contracts with roughly €140 billion in assets. Each one is an individual case with its own cost structure, its own guarantee and its own allowance history. An honest case-by-case assessment multiplied by millions cannot be done manually, and that is exactly where it is decided whether work on the existing book stays a sales promise or becomes a process.

What can be standardised is the route, not the outcome: analysis, comparison, documentation and transfer take the same path for every contract so that the result can stay individual. Xaver's switching service is designed for tens of thousands of advice sessions and transfers a month, a statement about the capacity of the process, not about today's volumes.