Tax in the payout phase: deferred, in both systems
Tax-wise the transfer changes less than many expect. Both systems follow the same principle: subsidy during saving, full taxation as income during payout. The differences lie in the payout forms, not in the tax rate.
The principle: deferred taxation
Subsidised contributions and allowances were tax-advantaged in the savings phase; in return, payouts in old age are fully taxable – as “other income” under § 22 no. 5 EStG at the personal tax rate of the year. This applies equally to Riester and the Altersvorsorgedepot. The transfer itself triggers no tax.
What the payout form means for tax
| Form | Taxation | Note |
|---|---|---|
| Lifelong annuity | Each monthly pension fully taxable in the year received | Evenly spread; usually a lower tax rate in old age |
| Drawdown plan (AVD, until 85) | Each payout fully taxable; returns inside the plan are not taxed separately | Instalment size affects the tax rate; can be shaped within the rules |
| Lump sum (up to 30%) | Fully taxable in the year of payout | Can raise progression noticeably that year; according to case law the one-fifth rule generally does not apply to subsidised pension capital |
What stays the same in both systems
- Returns in the savings phase are tax-free – no withholding tax on fund gains inside a Riester contract or an Altersvorsorgedepot.
- Unsubsidised contribution parts are taxed only on their income share at payout; providers must keep them separate.
- The transfer is not a harmful use: no clawback of allowances or tax benefits.
What differs
The special-expense deduction during saving is higher in the new system (up to €6,840 instead of €2,100), and with the better-of test the tax office decides whether allowance or deduction yields more. In payout, the drawdown plan allows shaping through instalment size, which a lifelong annuity does not. Tax details of drawdown plans follow with the administrative rules.
Quick answers
Does the transfer trigger tax?
No. Transfers between certified contracts are tax-neutral.
Is the lump sum eligible for the one-fifth rule?
For subsidised pension capital generally not, according to Federal Fiscal Court case law; full taxation in the payout year is the norm.
What you can check now
- Will you be compulsorily or voluntarily insured in statutory health insurance in old age?
- What other income do you expect in retirement – it determines the tax rate on the payout?
- Does your contract contain unsubsidised contribution parts?
- § 22 no. 5 EStG (taxation of pension contract benefits)
- Retirement Provision Reform Act (Altersvorsorgereformgesetz), Bundestag 27 March 2026, Bundesrat 8 May 2026, promulgated 26 May 2026 (BGBl. 2026 I No. 156)
- Federal Fiscal Court case law on the one-fifth rule for Riester lump sums
This page provides general information about statutory rules. It is not legal, tax or investment advice and makes no recommendation for any individual contract. For a personal assessment, consumer advice centres (Verbraucherzentralen) or licensed advisers are the right address – where to get advice.