What many Riester pensioners may not know: You do not necessarily have to have the capital saved paid out as a pension. There are also other options that are good to drive with.
At the earliest from the age of 60 or 62 Riester savers come into the so-called payment phase – depending on whether the contract was concluded before or after 2012. Some contracts may also provide for later retirements. But no matter how – savers should think about how the saved capital should flow back to them in good time before the payment begins. It is best to get an offer from your insurer or bank as early as possible.
Which payment variant is the right one in the end depends on the individual case. Katharina Lawrence from the consumer center in Hesse recommends consulting a tax advisor for a professional assessment. There are five options:
1. Retirement
According to the magazine “Finanztest” (8/2022), the payment of the Riester money as a lifelong pension is the standard variant. Anyone who decides on this form of payment will receive a fixed, taxed pension from their contractual partner every month – until death, even if the credit is used up. How high the guaranteed pension is depends on how much capital has been accumulated, how old the savers are when they retire and how customer-friendly the provider is in releasing the accumulated capital.
According to “Finanztest”, customers who decide to retire their Riester usually have to be very old in order to at least have the contributions and allowances paid out. Insurers often calculate with a relatively long life expectancy. That is why the contracts that turn positive before the average life expectancy is reached are particularly attractive.
But not only the return is decisive, but also the personal situation, according to the testers. For people who depend on an additional income in old age, even a bad Riester pension could be well suited.
2. Partial Payout
Buying a new car for retirement? Or take a big trip? If you need a lot of money in one go, you can have part of the Riester credit paid out. Up to 30 percent of them without losing government funding, says consumer advocate Lawrence. But: Even the partial payment is taxed. The remaining 70 percent of the capital is then annuitized.
According to “Finanztest”, insured persons should decide on the basis of their personal financial situation whether the pension reduced by the partial payment is sufficient to cover their running costs. They should also check whether the pension offer is acceptable overall.
3. Investment in home ownership
Whether it’s a nursing home, conversions to suit seniors or a smaller apartment: the living situation can definitely change again in old age. Riestergeld can also help here. According to Lawrence, it is possible, for example, to use the capital to buy a new, owner-occupied property or use it to pay off an existing home loan. Prerequisite: The contract holder himself or his spouse must be entered in the land register, the credit must have flowed into the property by the age of 68.
If you want, you can use the savings to convert your property to make it suitable for seniors or the disabled. The total investment must then be at least 20,000 euros, at least half of which must be used for senior-friendly conversion measures in accordance with DIN 18040.
In addition, Riestergeld can be used to buy certified long-term residential rights in a retirement or nursing home. The purchase of certified cooperative shares for self-use of a cooperative apartment is also an option.
If you want to use your Riester credit for home ownership, you have to apply for the money to be paid out at the Central Allowance Office for Retirement Assets. According to the “Finanztest”, the provider will not pay out the money without their notification. The complete application must have been submitted there at least ten months before the start of the disbursement phase, otherwise nothing will come of the project. Consumer advocate Lawrence therefore advises planning at least a year or a half before Riester pensions start.
And: Even if the money is used for home ownership, it has to be taxed. According to “Finanztest”, there are two options for this: Either all at once – then only 70 percent of the capital has to be taxed. Or the full amount is taxed evenly distributed over the years up to the age of 85.
4. Severance Pay
“If you have a Riester contract that only contains a few thousand euros, then you can have the credit paid out,” says Katharina Lawrence. The key word is small-amount pension. This works for calculated Riester pensions that are below the monthly amount of 32.90 euros in 2022. The exact value varies from year to year. But that is a voluntary option, according to the consumer advocate. “Not every provider does it or has to do it.”
Even in the case of severance pay, the paid-out balance is taxed. A tip from “Finanztest”: “If the contract allows it, new pensioners should postpone the payment of the severance payment until the beginning of their first full year of retirement.” The income is usually lower there, and so is the personal tax rate.
5. Termination
Terminating the Riester contract shortly before retirement initially sounds like the most unattractive option – because it costs savers all the allowances as well as the tax advantages that they enjoyed during the Riester payments. And yet the termination can make sense in some cases, according to “Finanztest”. Namely, when savers have paid a lot into the contract themselves in relation to the subsidy and have a high tax burden in retirement.
The advantage: After a termination that is detrimental to the subsidy, the tax office only taxes the amount that remains after deducting personal contributions, allowances and costs from the contract balance. According to the financial test, in many cases only half of them. This always applies if the capital is only paid out after the 60th or 62nd birthday and the contract ran for at least twelve years before the payment.
