Retirement Savings Act (Altersvermögensgesetz, AVmG)

Concept

Germany’s Retirement Savings Act (Altersvermögensgesetz, AVmG) took effect in 2001/2002 as part of the Riester pension reform and established state-subsidized, funded private retirement provision in Germany as a complement to the pay-as-you-go statutory pension scheme.

Content

The Act introduced the so-called Riester pension, subsidized through a combination of state allowances and special expense tax deductions, provided certified retirement savings contracts meet certain requirements — such as capital guarantees, annuitization, and permitted payout forms. At the same time, the pension level of the statutory pension scheme was gradually reduced to limit increases in contribution rates.

Significance

The Retirement Savings Act is regarded as a milestone in the German retirement provision system, as it initiated the transition from an almost exclusively pay-as-you-go system toward greater funded retirement provision and significantly strengthened the third pillar of retirement provision.