The German Bundestag approved the “Frühstartrente” (Early Start Pension) on Friday. This new measure aims to initiate private retirement savings for children and adolescents aged six to 18. The draft bill was passed in its second reading by the ruling coalition of the Union and SPD, despite opposition from the Greens and the Left Party, while the AfD abstained.
The state subsidy is set at ten euros per month per child. The first beneficiaries of this program will be children born in 2020. While contracts can still be made for older children, government funding is not provided for them. Starting in 2027, the birth year of children turning six in any given calendar year will be included in the Early Start Pension scheme. The estimated cost for this funding in 2027 is 198 million euros, a figure projected to rise to 411 million euros by 2030.
The approved law stipulates that if parents secure an individual, capital-backed retirement savings contract with a suitable provider, the state will deposit ten euros monthly into this personalized depot account. This amassed capital can be further bolstered by private contributions of up to 6,840 euros annually. If parents choose not to enroll the children in a contract, the ten euros per child per month will instead be invested collectively into the capital market. For this collective funding, a special federal fund, the “Frühstartrente,” will be established on January 1, 2028.
Fundamentally, distributions from the subsidized capital are not allowed before the age of 65-meaning the earliest possible payout would be in 2085.
