The German Bundestag has approved a reform to the country’s private pension system.

The bill, Altersvorsorgereformgesetz, was submitted by the federal government and passed today with a majority of the CDU/CSU and SPD, against the votes of the Left Party (Die Linke), while the AfD and Alliance 90/The Greens abstained.

The version of the legislation adopted by the Bundestag includes a number of amendments to the original draft, which were decided by the Finance Committee earlier this week.

For example, the fixed subsidy originally proposed as a set amount per euro saved has been replaced by a percentage-based model. Under the agreed framework, a subsidy of 50 per cent will apply to contributions of up to €360 per year, and 25 per cent to contributions between €360.01 and €1,800, bringing the maximum basic allowance to €540.

Provisions for savers with children have also been amended. A subsidy of 100 per cent will apply to personal contributions of up to €300 per year.

The scope of eligibility has been extended to include the self-employed. In addition, the legislation provides for increased support for low-income earners and a reduction in the cost cap for pension products.

The adopted text also includes the introduction of a standardised pension product designed to facilitate access to private pension provision, as well as provisions relating to investment via a state-backed fund.

The German government said it said that with the bill, it aims to “facilitate the provision of new private pension products that are affordable, straightforward, transparent and easy to understand”.

“The aim is to encourage a broad section of the population to invest in private pensions in order to safeguard their standard of living in old age,” it added.

Germany’s Deutsches Aktieninstitut (DAI) welcomed the passing of the bill as an “important step” that will bring “tangible benefits” to people from 2027 onwards.

DAI chief executive and member of the board, Henriette Peucker, said: “Today is a good day for people in Germany, because after years of hesitation, private pension provision has finally become a reality.

“The Pension Savings Account harnesses the full potential of shares, without any guarantee obligation or fixed annuity payments. This now enables everyone who wishes to make private provisions for old age to invest in shares, equity funds or ETFs on a long-term, broad and continuous basis. I am particularly pleased that the coalition has also taken the self-employed into account and increased support for low-income earners.”

She also praised the ‘simple standard account’, which will be run by a public body, but warned that it must not be given preferential treatment over private schemes.

“For competition to work effectively, state and private schemes must meet the same requirements. There must be no preference for the state-run solution, let alone an obligation,” she said.

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