Cancelling a Riester pension: When does it make sense and what alternatives are there?
23.05.25
5
Minutes
Katrin Straub
Managing Director at nextsure
Are you thinking about cancelling your Riester pension? This step can be expensive and is rarely the best solution. Find out what financial consequences cancellation has and which alternatives are more sensible.
The topic in brief and concise terms
Cancelling a Riester pension almost always leads to financial losses due to the repayment of allowances and tax advantages, as well as any fees incurred.
Alternatives such as premium suspension or switching providers are usually more sensible, to retain the existing subsidy and remain flexible.
Before giving notice, the long-term impact on retirement provision and all available options should always be carefully reviewed, ideally with professional advice.
Financial pitfalls: The direct costs of termination
Cancelling a Riester pension almost always involves financial losses. You must repay all government allowances and tax benefits. In 2023, the average repayment was around two thousand euros. Of this, around one thousand five hundred euros was attributable to allowances and over five hundred euros to tax benefits. In addition, initial, administration and sales costs may apply, which your provider deducts from your balance. [_5,_6] These costs are often offset in the first five years of the contract. [_19]
The surrender value, i.e. the amount actually paid out to you, can therefore be significantly lower than your contributions paid in. [_4,_9] In some cases, the balance is not even sufficient to cover all claims, so you may even have to pay more. [_2,_9] The cancellation is considered a "subsidy-damaging use", as the capital no longer serves retirement provision. [_1,_10] This step should therefore be carefully considered, because the taxes on cancellation can further increase the financial burden. The exact calculation of the surrender value can take up to two months after your provider has contacted the Central Allowance Office for Retirement Assets (ZfA). [_2,_4]
The termination process: formal requirements and deadlines
If you wish to cancel your Riester pension, you must do so in writing to your provider. [_11,_12] The notice period is generally six weeks before the desired exit month, but this may vary depending on the provider. [_6,_11] The key factor is when the cancellation is received by the provider, not the date it is posted. [_12] Your cancellation letter should include the following information:
Your contract number and personal details. [_15]
A clear statement that you wish to cancel at the earliest possible date. [_12]
Revocation of the direct debit authorisation. [_11]
Your bank details (IBAN and BIC) for the payment of the remaining balance. [_11,_12]
Optionally, a deadline of fourteen days, for example, for confirmation of the cancellation. [_12]
It is advisable to send the cancellation by registered mail with acknowledgement of receipt so that you have proof. [_15] Please note that cancelling will also remove the protection from seizure on your Riester balance, which may be relevant if you have debts. [_19] Careful preparation of these documents can speed up the process. [_15]
Consider alternatives: Is resigning really the best solution?
Before cancelling your Riester pension, you should definitely consider alternatives. Cancelling is often the least favourable financial option. [_3,_8] A commonly used alternative is contribution suspension. [_1,_16] You stop making contributions, but your previously accumulated capital, including the bonuses received, remains in the contract and continues to accrue interest. [_16,_17] During the suspension, you do not receive any new bonuses or tax advantages. [_1,_17] One advantage is that you can reactivate the contract later. [_17]
Another option is to reduce your contributions, possibly down to the minimum personal contribution of sixty euros per year, in order to remain entitled to the full basic allowance. [_1,_20] A contribution suspension contract can also be a worthwhile option. If you are dissatisfied with the terms of your current contract, for example due to high costs or low returns, changing provider can make sense. [_1,_18] Your balance is transferred to a new contract without losing the subsidies you have received so far. [_18,_19] These alternatives help you avoid the disadvantages of cancelling.
Contribution waiver: gain flexibility, retain subsidies
Contribution suspension for your Riester pension is a flexible way to respond to financial shortfalls without giving up the contract altogether. [_17,_20] You stop paying contributions, but the capital saved so far and the allowances received on it remain yours. [_16,_17] The major advantage: you do not have to repay any allowances or tax benefits. [_17] Your contract value can continue to grow through interest or fund performance. [_1] However, for the period of contribution suspension, you will not receive any new state allowances and cannot claim any further tax advantages. [_1,_17]
One disadvantage can be that the garnishment protection of the Riester balance lapses during the contribution suspension if you no longer apply for allowances. [_2_] The later pension will of course be lower because of the missing contributions. [_16] However, you can reactivate the contract at any time and resume paying contributions. [_17] Contribution suspension is often a better solution than cancellation, especially if you generally want to keep the Riester pension as retirement provision. Applying is usually informal and can be done with the provider. [_17]
Switching provider: Take advantage of better terms and return opportunities
A switch of Riester provider can be worthwhile if you are struggling with high costs or an unsatisfactory return on your current contract. [_18,_21] By switching, you can transfer your accumulated savings to a new, potentially cheaper contract and keep the state subsidy. [_18,_25] The cost of switching can be between fifty and one hundred and fifty euros with the old provider. [_21,_22] In addition, the new provider may charge initial setup fees unless you choose a net tariff. [_21,_24]
It is important to know that the statutory contribution guarantee (retention of all contributions and bonuses until retirement) does not apply to the old contract when switching, but instead the transferred amount counts as the new guaranteed balance. [_22,_21_] If your contract balance is below the contribution guarantee, making the contract paid-up is often more sensible so as not to carry losses into the new contract. [_1_] Switching to a Riester fund savings plan may be worth considering if there is a long remaining term and you are hoping for higher returns. [_4_,_21] Compare the terms and Riester offers carefully before making a decision. The new provider often takes care of cancelling the old contract with the previous provider. [_5,_25]
Special cases: When termination can be considered exceptionally
Although cancelling a Riester pension is usually disadvantageous, there are a few exceptional situations in which it could be worth considering. [_1_,_16_] One such case may be a serious illness during the accumulation phase, if the capital is needed more urgently elsewhere or is to be passed on as an inheritance. [_16_] Some also consider cancelling if the amounts saved are very small, so that the administration fees could exceed the returns, or if no allowances were claimed and the capital can be invested more profitably elsewhere. [_5_] However, even then, repaying the support received is a significant drawback. [_1_]
Another exception is the settlement of a so-called small-pension annuity. [_10_] If the monthly pension in 2024 does not exceed thirty-five point thirty-five euros, the provider may settle it as a one-off payment without this being treated as detrimental to the state support received. [_10_] A partial capital payment of up to thirty per cent at the start of the payout phase is also harmless. [_10_] Before cancelling for any of these reasons, however, you should consider the long-term impact on your retirement provision. Cancelling should always be the very last option. [_8]
The decision to cancel a Riester pension should never be made lightly. The long-term consequences for your retirement provision often outweigh short-term financial relief. The Riester pension is one component of the three pillars of retirement provision and aims to close the pension gap. Cancelling it opens that gap up again. Before you act, obtain the current surrender value from your provider and have the financial impact explained to you in detail. [_19]
Our expert tip: Always check alternatives first, such as premium exemption or switching providers. These options often preserve your existing benefits and offer greater flexibility. [_8,_19] Professional advice can help you find the best solution for your individual situation and understand the complexity of the contracts. [_28_1871] Remember that even old insurance policies may be valuable in certain circumstances. A well-founded decision protects your assets and your future pension.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific recommendations for optimisation.
More useful links
Wikipedia provides a comprehensive overview of the Riester pension.
Deutsche Rentenversicherung provides information on whether cancelling the Riester contract makes sense.
Deutsche Rentenversicherung explains the option of suspending a Riester contract.
Deutsche Rentenversicherung describes how the payout of a Riester contract works.
Deutsche Rentenversicherung provides information on changing the provider or tariff for your Riester contract.
Verbraucherzentrale provides comprehensive information about the Riester pension and important aspects of private retirement provision.
Verbraucherzentrale gives advice on how you can defend yourself against impermissible initial charges in Riester savings contracts.
Deutsche Rentenversicherung explains how the repayment amount for Riester contracts is determined.
Deutsche Rentenversicherung answers frequently asked questions about the Riester pension.
FAQ
How much money will I get back if I cancel my Riester pension?
You receive the so-called surrender value. This is often significantly lower than your contributions, as all government bonuses, tax advantages and various contract costs are deducted. On average, savers had to repay around 2,000 euros in government support in 2023.
What deadlines do I need to observe when terminating a Riester pension?
The notice period is usually six weeks before the desired cancellation month, but this can vary depending on the provider. What matters is the provider receiving the written cancellation notice.
Will I lose my tax benefits if I cancel my Riester pension?
Yes, all tax advantages obtained through the special expenses deduction must be repaid if the contract is terminated. In addition, any income generated may have to be taxed. [1,2,_10_]
What are the advantages of a contribution suspension compared with cancellation?
With contribution exemption, the capital saved so far and the bonuses received remain in the contract. No repayments are made. You simply stop paying any new contributions and do not receive any new subsidies for this period.
Under what circumstances is it worthwhile to switch provider for a Riester pension?
Changing provider can make sense if your current contract has high costs, delivers a low return, or you find better terms with another provider. The existing subsidy remains intact.
Are there situations in which terminating a Riester pension could still make sense?
Cancellation should only be considered in very rare exceptional cases, e.g. in the event of serious illness during the accumulation phase, very small contract sums or if no subsidies were used. In most cases, the financial disadvantages clearly outweigh the benefits. [16_,_5_]
