Making your Riester contract paid-up: strategies for your financial flexibility
24.06.25
6
Minutes
Katrin Straub
Managing Director at nextsure
Are you thinking about making your Riester contract paid-up? A well-considered decision can ease your financial burden without immediately giving up valuable benefits. Find out here which steps are necessary and what consequences you should consider.
The topic in brief and concise terms
Exemption from contributions for a Riester contract is possible at any time; any grants and capital already received remain in place, but no new subsidies are provided.
Unlike cancellation, with a paid-up policy no allowances or tax benefits have to be repaid, which often saves around two thousand euros.
Alternatives such as reducing contributions or switching providers should be considered; reactivating the premium-free contract at a later date is usually straightforward.
Understanding contribution exemption: What happens to your Riester contract?
The contribution suspension of your Riester contract is possible at any time and is a formal step. From the desired date, you stop making contributions. Your contract is then put on hold, but the capital accumulated, including any bonuses already received, remains untouched. During the suspension period, you will not receive any new state bonuses or tax benefits. However, the subsidies you have already received are not lost, which is a major advantage compared with contract termination. This option can remain in place for many years until retirement.
It is important that no additional costs are incurred for the contribution suspension. Your provider will recalculate the expected pension, as future payments and subsidies will no longer be made. This is a crucial difference compared with termination, which often results in significant financial disadvantages. The contribution suspension therefore offers a flexible response to changing financial circumstances.
Weighing up the financial implications: The impact of premium waiver
The most obvious consequence of a contribution suspension is a lower Riester pension in retirement. As no new contributions or bonuses are paid in, the capital grows more slowly. Ongoing contract costs can reduce returns, even if no further contributions are paid. An important point is the possible loss of protection from attachment for the Riester savings. This protection is often tied to the receipt of state funding, which is suspended during the contribution-free period.
Compared with cancellation, a contribution suspension is usually the better choice. If you cancel, you must repay all state bonuses and tax advantages. In 2023, the average repayment amounted to around two thousand euros. In addition, arrangement and administrative fees often apply, which further reduce the surrender value. A contribution suspension at least protects what has been achieved so far. A private pension insurance policy can be an alternative for continuing to make provision.
Consider alternatives: reduce contributions or switch providers?
Before you make your Riester contract completely paid up, there are gentler options. One possibility is to reduce your contributions. You then pay in less, which lowers your financial burden. Please note that you will only receive the full allowances if you pay in four percent of your gross income from the previous year (maximum EUR 2,100). If your contributions are lower, you will only receive the allowances proportionately.
Changing provider is another alternative if you are unhappy with the terms and conditions. In this case, you can transfer your accumulated capital and the allowances you have received to a new provider. This is often complex and not always beneficial, especially if initial charges are incurred again. Another option, instead of cancelling, is to use the capital for owner-occupied residential property (Wohn-Riester). This is possible without losing the incentives. Weigh these options carefully before making a decision.
Expert tips: When is premium-free cover the right choice?
Making the contract contribution-free is a particularly sensible strategy during periods of financial difficulty. It is almost always better than cancelling too hastily, where you can lose an average of around 1,900 euros in government support. Our expert tip: see contribution-free status as a flexible bridge, not a final solution. You can reactivate the contract later if your financial situation improves. This only requires notifying your insurer.
Review your contract terms carefully, especially the ongoing costs during the suspension period. Sometimes it can make more sense to let the contract rest and invest the money saved elsewhere, for example in an ETF savings plan. Comprehensive retirement advice helps you make the best decision for your individual situation. Bear in mind that the Riester pension, despite criticism, can still offer advantages for certain groups, such as low earners with children.
The following points should be considered when making your decision:
Your current financial situation and the duration of the shortfall.
The amount of capital already saved and the bonuses received.
Contract costs during contribution-free status.
Alternative investment options for the contributions freed up.
Long-term effects on your retirement planning.
The امکان of reactivating the contract at a later date.
Start the process: How to make your Riester contract contribution-free
Suspending contributions to your Riester contract is straightforward and usually only requires an informal letter. Send this directly to your Riester provider. There are no specific deadlines; contribution suspension is possible at any time. To ensure your request is processed correctly, certain details should be included. You will often find a template for such a letter online or directly from consumer advice centres.
Your letter should include the following information:
Your full personal details (name, address, date of birth).
The contract number of your Riester contract.
A clear request to suspend contributions to the contract.
The date from which the contribution suspension should apply.
A request for written confirmation of the contribution suspension and the date the contract is placed on hold.
Our expert tip: Send the letter by registered post with proof of delivery. This gives you evidence that it was received by your provider. In your letter, ask for confirmation within, for example, fourteen days. At the same time, cancel the direct debit authorisation for the contributions. A review of older contracts may also be worthwhile here.
Long-term planning: Contribution exemption in the context of your retirement provision
The decision to make a Riester contract paid-up should always be considered in the overall context of your retirement provision. It is a measure that can provide short-term financial relief, but has long-term implications. The allowances already received and the capital remain secure, but future growth potential is reduced. Consider whether this is the right strategy for your personal Riester situation.
Reactivation at a later date is usually straightforward. You then resume paying in contributions and receive state allowances again. The pension forecast is then recalculated. It is important to review your overall retirement planning strategy regularly. Circumstances change, and what is right today may no longer be so in five or ten years. Paid-up status is a tool that offers flexibility, but it should be used deliberately.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific optimisation suggestions.
More useful links
The Federal Ministry of Finance provides official information on the Riester pension and its tax aspects.
On Wikipedia you will find a comprehensive article on the Riester pension, which explains how it works and its history.
The Federal Ministry of Labour and Social Affairs provides further information on the Riester pension and its role in retirement provision.
The German Pension Insurance provides general information on the Riester pension and its significance for retirement provision.
FAQ
How do I make my Riester contract contribution-free?
You must inform your Riester provider in writing of your request. Provide your contract number, personal details and the desired date for the contribution waiver. Request written confirmation.
What are the disadvantages of making a Riester contract paid-up?
The main disadvantage is a lower retirement pension, as no new contributions or allowances are paid in. In addition, protection against garnishment may lapse and ongoing contract fees can reduce returns.
Will I lose my tax advantages if I stop paying contributions?
The tax benefits you have used up to the premium-free status remain in place. However, for the period during which the contract is dormant and you do not pay any contributions, you cannot claim any new tax benefits.
What is the difference between contribution suspension and cancellation for a Riester pension?
With contribution exemption, the accumulated capital and allowances remain intact; only no new payments/subsidies are made. In the event of cancellation, the capital (less costs) is paid out, but all allowances and tax benefits must be repaid.
Can I also reduce my contributions instead of suspending the contract entirely?
Yes, reducing contributions is an alternative. Please note that the amount of the state subsidies depends on your contribution payments. If you pay less than four per cent of your gross income from the previous year, you will only receive subsidies on a pro rata basis.
How does contribution suspension affect Wohn-Riester?
A Wohn-Riester contract can also be set to paid-up status. The implications for bonuses and continuation of the contract are similar. For details, you should contact your provider or seek specialist advice.
