Making a Riester Contract Contribution-Free: Strategies for Your Financial Flexibility
24 Jun 2025
4
Minutes
Katrin Straub
CEO at nextsure
Are you considering making your Riester contract premium-free? A wise decision can provide you with financial relief without immediately giving up valuable benefits. Find out here which steps are necessary and which consequences you should consider.
The topic in brief and concise terms
The suspension of contributions for a Riester contract is possible at any time; grants and capital already received are retained, but there are no new subsidies.
Unlike cancellation, no allowances or tax benefits need to be repaid in the case of premium exemption, which often saves costs of around two thousand euros.
Alternatives such as reducing contributions or switching providers should be considered; reactivating a contract that was previously without contributions is usually straightforward.
Understanding Contribution Exemption: What Happens to Your Riester Contract?
The suspension of contributions for your Riester contract is possible at any time and is a formal act. From the desired date, you no longer make any contributions. Your contract is dormant; however, the accumulated capital, including any bonuses already received, remains untouched. During the suspension period, you will not receive any new government bonuses or tax benefits. However, the previous incentives are not lost, which is a significant advantage compared to terminating the contract. This option can remain available for many years until retirement.
It is important that no additional costs incur for the suspension of contributions. Your provider will recalculate the expected pension because future contributions and incentives are absent. This is a crucial difference from termination, which often results in considerable financial disadvantages. The suspension of contributions thus offers a flexible response to changing financial situations.
Weighing Financial Consequences: Impact of Premium Exemption
The most obvious consequence of suspending contributions is a reduced Riester pension in retirement. Since no new contributions and allowances are flowing in, the capital grows more slowly. Ongoing contract costs can reduce returns, even if no more contributions are being paid. An important point is the possible loss of creditor protection for the Riester savings. This protection is often linked to the receipt of government subsidies, which are suspended during the contribution suspension.
Compared to cancellation, suspending contributions is usually the better choice. Upon cancellation, you must repay all government allowances and tax advantages. In 2023, the average repayment was around two thousand euros. In addition, there are often initial and administrative costs that further reduce the surrender value. Suspending contributions at least secures what has been achieved so far. A private pension insurance can be an alternative to continue providing for the future.
Consider alternatives: Reduce contributions or switch providers?
Before fully suspending contributions to your Riester contract, there are milder options available. One option is to reduce your contributions. This means you pay less, reducing your financial burden. Note that you will only receive the full allowances if you pay in four percent of your previous year's gross income (up to a maximum of 2,100 euros). With lower contributions, you will only receive allowances proportionately.
Switching providers is another alternative if you are dissatisfied with the terms. In this case, you can transfer your accumulated capital and the allowances received to a new provider. This is often complex and not always beneficial, especially if new costs arise. Another option, instead of cancelling, is using the capital for owner-occupied residential property (Wohn-Riester). This is possible without losing the subsidies. Carefully consider these options before making a decision.
Expert Tips: When is a Contribution Suspension the Right Choice?
A premium suspension is a strategy worth considering, particularly during times of financial constraints. It is almost always better than an impulsive cancellation, where you could lose approximately €1,900 in contributions. Our expert tip: View the premium suspension as a flexible bridge, not as a permanent solution. You can reactivate the contract later, when your financial situation improves. This only requires notification to your insurer.
Carefully check your contract terms, especially the ongoing costs during the dormant period. Sometimes, it may be more sensible to keep the contract dormant and invest the saved money elsewhere, such as in an ETF savings plan. Comprehensive pension advice helps to make the best decision for your individual situation. Remember, despite criticism, the Riester pension can still offer benefits for certain groups of people, like low-income earners with children.
Consider the following points in your decision:
Your current financial situation and the duration of the constraint.
The amount of capital already saved and grants received.
Contract costs during premium suspension.
Alternative investment options for the freed-up contributions.
Long-term impact on your retirement planning.
Possibility of later reactivating the contract.
Start process: How to make your Riester contract contribution-free
Making your Riester contract contributions exempt is straightforward and usually only requires an informal letter. You send this directly to your Riester provider. There are no specific deadlines; the exemption can be made at any time. To ensure your request is processed correctly, certain information should be included. A template for such a letter can often be found online or directly from consumer advice centres.
Your letter should include the following details:
Your complete personal details (name, address, date of birth).
The contract number of your Riester contract.
A clear request for exemption from contributions for the contract.
The date the exemption should commence.
A request for written confirmation of the exemption and the date it becomes effective.
Our expert tip: Send the letter by registered mail with a return receipt. This provides proof of receipt by your provider. In your letter, request confirmation within, for example, fourteen days. Simultaneously, cancel the direct debit authorization for the contributions. A review of old contracts may also be worthwhile here.
Long-term Planning: Contribution Waiver in the Context of Your Pension Provision
The decision to make a Riester contract contribution-free should always be considered within the broader context of your retirement planning. It is a measure that can provide temporary financial relief but has long-term consequences. While the allowances already received and the capital remain secure, the potential for future growth is reduced. Consider whether this is the right strategy for your specific Riester situation.
A subsequent reactivation is usually straightforward. You then resume paying contributions and once again receive government grants. The pension forecast will then be recalculated. It is important to regularly review your overall retirement strategy. Circumstances change, and what is right today may not be right in five or ten years. Making contributions free is a tool that offers flexibility but should be used consciously.
Request an individual risk analysis now: Have your insurance situation checked for free and receive concrete optimization suggestions.
More useful links
The Federal Ministry of Finance offers official information on the Riester pension and its tax aspects.
On Wikipedia, you will find a comprehensive article on the Riester pension, which looks at its operation and history.
The Federal Ministry for Labour and Social Affairs provides additional information on the Riester pension and its role in retirement planning.
The German Pension Insurance offers general information on the Riester pension and its significance for retirement planning.
FAQ
How can I make my Riester contract contribution-free?
You must inform your Riester provider in writing about your wish. Provide your contract number, personal details, and the desired date for contribution exemption. Request a written confirmation.
What are the disadvantages of exempting contributions from a Riester contract?
The main disadvantage is a lower old-age pension since no new contributions and allowances are made. Additionally, the protection against seizure may lapse, and ongoing contract costs can reduce the return.
Do I lose my tax benefits if I suspend my contributions?
The tax benefits you enjoyed up to the point of contribution exemption remain available to you. However, for the period during which the contract is inactive and you do not make any contributions, you cannot claim any new tax advantages.
What is the difference between contribution exemption and termination in Riester?
In the case of contribution suspension, the accumulated capital and allowances are retained; however, no new payments/funding will be made. Upon termination, the capital (after deducting costs) is paid out, but all allowances and tax benefits must be repaid.
Can I reduce my contributions instead of letting the contract rest entirely?
Yes, a reduction in contributions is an alternative. Please note that the amount of state allowances depends on your contribution payment. If you pay less than four percent of your previous year's gross income, you will only receive allowances proportionally.
How does contribution exemption affect Wohn-Riester?
A Wohn-Riester contract can also be made contribution-free. The consequences regarding subsidies and contract continuation are similar. For details, you should contact your provider or seek professional advice.
