Bundestag passes the plan

The Bundestag approved the Frühstartrente, or 'early start pension', on Friday, 16 October, with votes from the CDU/CSU and SPD coalition. Under the scheme, the state pays 10 euros a month into an individual savings account for each child aged 6 to 18. Parents or grandparents may voluntarily add up to 6,840 euros per calendar year. The bill still requires approval from the Bundesrat, the upper house that represents Germany's 16 states. Reports differ on the start date: one version says the entitlement covers children born from 2020 with retroactive effect from 1 January 2026, while another says payments begin in 2027 for the 2020 birth cohort.

Where the money goes

Children become eligible if they hold a German tax identification number and were born in Germany or are legally registered there. Parents who do not open a private account send the state money to a fund run by the Bundesbank and invested in financial markets. Beneficiaries can later move their savings into a private pension plan. Ralf Scherfling of the Verbraucherzentrale NRW consumer organisation said the scheme is meant for the later retirement provision of today's child.

“The Frühstartrente is intended for the later retirement provision of today's child.”

Scherfling added that a child can sign a contract between the ages of 18 and 35 to draw the money. Pension payments start between ages 65 and 70, and the state contributions cannot be withdrawn earlier.

Projections and cost to the state

Finance Minister Lars Klingbeil said in a statement that public payments alone could grow to about 53,000 euros by age 65, and to as much as 160,000 euros if parents or grandparents add 20 euros a month. The state pays 1,440 euros per child in nominal terms over twelve years. The 53,000 euro projection assumes an average annual return of 7% with compounding, and the outcome depends on market performance over several decades. Adjusted for average inflation of 2%, the 53,000 euros would be worth roughly 20,000 euros in today's purchasing power. The cost to the state is put at 198 million euros in 2027, rising to 411 million euros in 2030.

2027198

2030411

2027

198 million euros

2030

411 million euros

Data from the article text

Fees and the case for low-cost depots

Verbraucherzentrale NRW calculations show that running costs matter a great deal over a lifetime. Leaving the state's 1,440 euros in a standard depot until retirement could yield about 76,400 euros at age 68 with costs of around 0.2% a year. At the maximum permitted 1% level, the same projection gives 48,600 euros, a gap of roughly 27,800 euros. That projection assumes a 7.5% annual return. Standard depots may not charge acquisition or sales costs before the child turns 18, and running costs are capped at 1% a year.

About 0.2% annual costs76,400

1% annual costs (maximum)48,600

About 0.2% annual costs

76400 euros

1% annual costs (maximum)

48600 euros

Data from the article text

Political and industry reaction

The Greens and Die Linke argue the measure could widen social inequality. The opposition says children from wealthier families will accumulate far more capital than those receiving only the state contribution. The government counters that the scheme builds an initial retirement capital base and improves young people's financial education. The insurance sector welcomed the law, and Marija Kolak, president of the German cooperative banks federation, saw it as a way to build savings and stock market culture. Consumer groups warn that children without their own account will be left out of the benefits for years. Chancellor Friedrich Merz wrote on X that children receive starting capital for their retirement savings from 1 January.