Altersvorsorgedepot or private pension insurance?

Tilman Freyenhagen

Published on 15 June 2026 · Updated on 7 August 2026 · Managing Director & Partner, Alsterspree Verlag GmbH

Setting the course from 2027: Altersvorsorgedepot versus private pension insurance

Whether you should opt for the new Altersvorsorgedepot (the state-subsidised retirement investment account) or classic private pension insurance can be answered by looking at your personal need for security and your return goals. While private pension insurance guarantees you lifelong pension payments and contractual guarantees, the Altersvorsorgedepot, from 1 January 2027, scores through significantly lower costs, higher return potential with ETFs, and direct state subsidy without a contribution guarantee^[1]. With this fundamental change of system, lawmakers are responding to the poor profitability of older forms of pension provision.

Two worlds side by side

For security-focused savers, the situation is multi-layered. Traditional private pension insurance is a well-established but often extremely expensive instrument: most of the contributions you pay in flow into the insurer's reserve fund (Deckungsstock), into expensive guarantee products, or towards covering high set-up costs, which significantly reduces the effective net return over the decades. Set against this is the Altersvorsorgedepot, available from 2027, which enables a highly opportunity-oriented investment in low-cost ETFs^[2]. You do without a hard contribution guarantee here, but in return you benefit from the uncapped market return and a highly flexible payout phase in retirement. Our knowledge section helps you analyse the precise contractual differences and the tax framework in detail.

• Private pension insurance: offers contractually guaranteed minimum payouts and a lifelong pension, but is characterised by high set-up and administration costs.
• Altersvorsorgedepot: allows a 100 percent equity allocation through high-potential ETFs, offers state allowances, but forgoes formal capital guarantees.
• System change from 2027: a move away from rigid guarantee requirements towards self-directed, subsidised wealth-building for a broad target group.

To set the right course for your future, you should carefully examine your personal risk tolerance and your pension preferences. Anyone who prioritises absolute planning certainty through a guaranteed, lifelong pension, and consciously accepts lower returns in exchange, will continue to lean towards insurance. But anyone who wants to offset inflation over the long run, achieve genuine wealth growth with state support, and keep control over their own capital, will find the more modern and transparent alternative in the Altersvorsorgedepot. Please note: financial-mathematical calculations and comparisons are for illustration purposes only. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

Cost structures compared: account fees versus insurance tariffs

Private pension insurance often comes with substantial fees that noticeably slow down long-term wealth-building. Alongside the initial distribution and set-up costs, which are spread over the first five years, ongoing administration costs and fund costs weigh on the annual return. According to a study by the Verbraucherzentrale (Germany's consumer advice centre), classic pension insurance often loses half its returns to set-up, distribution and ongoing costs^[3]. These costs depress the effective annual return and reduce the capital that's actually working for the compounding effect.

By contrast, the Altersvorsorgedepot, starting on 1 January 2027, offers a lean cost structure. Because it's a direct securities account, expensive insurance wrappers and distribution set-up fees fall away entirely. Here, investors only pay the low product costs of cost-effective ETFs, plus the brokers' modest account-keeping and transaction fees. To work out this leverage precisely for your own planning, our subsidy calculator is available to you. It transparently illustrates how doing without expensive tariffs translates directly into a higher final capital sum.

Because of the compounding effect, the long-term difference between these fee structures is enormous. Even a gap of just over one percent in annual costs can, over a term of several decades, add up to a difference of many tens of thousands of euros in your pension capital. If, as a security-focused saver, you're aiming for a high final return, you should scrutinise the contractual fixed costs closely. If you're looking for guidance in making the decision, our knowledge section can help you with detailed analyses, or you can use our independent advice service for personal, neutral advice.

Note: the cost examples and comparisons above are for illustration and are model-based. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

Return potential and flexibility: the equity market versus the reserve fund

For security-focused investors, capital preservation often comes first. But a closer look at the investment methods shows that extreme security is bought dearly by giving up return. While the new Altersvorsorgedepot enables direct, low-cost participation in the full return potential of the global equity market through ETFs, classic private pension insurance invests savers' capital predominantly in the insurer's low-risk reserve fund. This rigid investment strategy does dampen short-term fluctuations in value, but it significantly limits the long-term growth of your capital.

Historical performance illustrates this difference very precisely. Broad global equity indices such as the MSCI World have delivered an average return of around 8 percent a year since 1975^[4]. By comparison, the ongoing interest credited within the reserve fund of German life insurers most recently averaged a meagre 2.3 to 2.8 percent a year across the market^[5]. Once you add the extra burden of high set-up and administration costs on the insurance contracts, the real net return often falls even further behind inflation. Through the knowledge section we provide detailed, source-based analyses that illustrate this return gap for different groups of savers.

Another key difference lies in the flexibility of contribution payments and account structure. A modern Altersvorsorgedepot lets you raise, lower or temporarily pause your savings rate at any time, free of charge. You can also adjust your fund selection yourself to respond to changing life circumstances. Private pension insurance, by contrast, not infrequently penalises such changes with extra fees or the loss of guaranteed benefits. If you'd like to know exactly how different return scenarios and subsidies affect your future pension balance, you can easily calculate this yourself with our interactive subsidy calculator.

The security question: the risk of missing guarantees in the Altersvorsorgedepot

For security-focused savers, forgoing contribution guarantees in the new Altersvorsorgedepot (AVD) may seem counterintuitive at first. Classic private pension insurance has advertised for decades with the promise that your contributions are guaranteed to be protected once your pension starts. But this protection is deceptive: consumer advocates repeatedly point out that rigid guarantees in pension insurance often lead to extremely high costs and minimal returns, which puts your real purchasing power in retirement at risk^[3]. The new Altersvorsorgedepot, starting on 1 January 2027, deliberately breaks with this constraint.

The way contribution guarantees work is the main reason for this drag on returns. To provide a guarantee, insurers have to invest most of your money in low-yield, nominally safe government bonds. In periods of low interest rates, this leaves little room for high-return investments such as equities or ETFs. In the Altersvorsorgedepot, this obligation to provide a contribution guarantee falls away completely, which lets savers capture the full return potential of the global capital market with tax support^[1]. Prices in the account do fluctuate in the short term, but seen historically, a long investment horizon reliably evens out these fluctuations.

A solid safety net doesn't need an expensive drag on returns. For security-focused investors, the key lies not in nominal guarantees but in broad risk diversification through global equity ETFs and a sufficiently long time horizon. Through our knowledge section you can carry out detailed comparisons. If you'd like to work out the precise difference for your personal situation, our interactive subsidy calculator is available to you. Alternatively, we're happy to support you, via Vorsorgedepot-Lotse and our independent advice service, in finding the right path to secure, high-return retirement provision. Note: this comparison serves information purposes only and does not constitute investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

State subsidy from 2027: allowances and tax advantages side by side

The key difference between the new Altersvorsorgedepot and classic private pension insurance lies in the systematic structure of state support. From 2027, savers with the Altersvorsorgedepot benefit from direct state allowance subsidy that flows into their wealth-building^[1]. The state pays an annual Grundzulage (basic state allowance) of up to 540 euros on an own contribution of 1,800 euros. For families, this advantage grows substantially through a Kinderzulage (child allowance) of 300 euros per child a year. Young savers under 25 also receive a one-off Berufseinsteigerbonus (career-starter bonus) of 200 euros. An unsubsidised private pension insurance policy, by contrast, offers no direct state allowances at all during the accumulation phase.

Alongside the allowances, the Altersvorsorgedepot also benefits from a Günstigerprüfung (the tax office's automatic best-outcome comparison). Contributions can be deducted under the Sonderausgabenabzug (deduction as a special expense). If the tax saving is worth more than the allowances, the difference is refunded. With an unsubsidised private pension insurance policy, this tax relief disappears entirely during the saving phase, since contributions come out of already-taxed net income. For security-focused investors, this creates an unequal starting position: while the account is boosted by state contributions right away, the capital in the pension insurance policy remains unsubsidised during the accumulation phase.

In the payout phase, the tax logic reverses. While Altersvorsorgedepot payouts are fully subject to deferred taxation, private pension insurance benefits from certain privileges. With a lifelong pension, only the small income share (Ertragsanteil) is taxed. With a lump-sum settlement, the Halbeinkünfteverfahren applies under certain conditions (a minimum term of 12 years, payout from age 62), under which only half of the gains are taxed. To calculate these effects precisely for your own situation, the subsidy calculator is available to you. Further detail is offered by our knowledge section. Please note: all comparisons shown are for illustration and do not constitute investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

The payout phase: a flexible drawdown plan versus a lifelong pension

Once you turn 65, savers face the decisive question of how to use their accumulated wealth in retirement. While classic private pension insurance advertises a lifelong, guaranteed Leibrente (life annuity), the new Altersvorsorgedepot brings unprecedented flexibility to the payout phase. Rather than being forced to convert the capital into an annuity, you can opt for a flexible drawdown plan with the subsidised account. This change in the law, brought about by the enacted Altersvorsorgereformgesetz (Reform of Private Pension Provision Act), makes it possible to manage your savings in retirement according to your needs and return goals^[6]. For security-focused investors, the trade-off here is between the reliable protection against longevity risk and the return potential plus full control over your own capital.

The three core areas compared: payout, guarantee and inheritance

• The drawdown plan up to age 85: the Altersvorsorgedepot allows a time-limited drawdown plan that must run at least until you turn 85. In the meantime, the remaining balance stays invested in ETFs or funds and can keep growing.
• The lifelong pension guarantee compared: private pension insurance guarantees a monthly payout for the rest of your life, no matter how old you get. This protects against the risk of running out of money in old age, but it usually comes with a significantly lower initial pension amount.
• Inheritability and capital protection on death: if a saver dies early, the remaining balance in the Altersvorsorgedepot becomes part of the estate and is fully inheritable by relatives. With classic pension insurance, the capital often reverts to the pool of policyholders, unless expensive extras such as a guaranteed payment period have been arranged.

The choice between a flexible drawdown plan and a lifelong pension guarantee therefore depends heavily on your individual need for security. While private pension insurance offers fixed protection, the Altersvorsorgedepot scores with low costs, high flexibility and full inheritability. As a neutral guide, the Altersvorsorgedepot guide from Vorsorgedepot-Lotse helps you weigh up the pros and cons of both systems transparently for your personal situation. With the subsidy calculator you can also work out, without obligation, how different subsidy and cost structures affect your future final capital. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

Tax treatment: deferred taxation versus the Halbeinkünfteverfahren

When deciding between an Altersvorsorgedepot and private pension insurance, the tax treatment in the payout phase plays a decisive role. During the accumulation phase, both routes work in your favour: neither the state-subsidised Altersvorsorgedepot nor private pension insurance incurs tax on interim reallocations, dividends or interest income^[1]. It's only in retirement, once payouts begin, that the tax paths diverge fundamentally.

Payouts from the state-subsidised Altersvorsorgedepot are subject to deferred taxation in retirement. That means payouts must be taxed in full at your personal income tax rate, provided the contributions received tax support during the accumulation phase. With private pension insurance, by contrast, a lump-sum settlement triggers what's known as the Halbeinkünfteverfahren (the half-income method)^[7]. If the contract has run for at least 12 years and you've turned 62, you only have to pay tax on 50 percent of the gains achieved, at your personal tax rate.

This creates different optimisation opportunities for security-focused investors. Because your personal tax rate in retirement is usually lower than during your working life, the deferred taxation of the Altersvorsorgedepot softens the tax burden. If, however, you're aiming for a large lump-sum payment, the Halbeinkünfteverfahren for private pension insurance may be more tax-attractive. To calculate the optimal tax approach for you, our subsidy calculator is available to you. For further questions, our knowledge section offers in-depth insights, while our independent advice service on our platform helps you find the right expert. (Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.)

Decision guide: which pension route suits your profile?

When deciding between the Altersvorsorgedepot and private pension insurance, your personal need for security takes centre stage. Classic pension insurance guarantees a lifelong pension and often a minimum preservation of contributions, but weak returns often result from high effective costs of 1.5 to 2.5 percent a year^[8]. The Altersvorsorgedepot, subsidised from 2027, forgoes hard contribution guarantees in its standard model, but in return enables a highly efficient, low-cost equity investment with a statutory cost cap of no more than 1.0 percent a year^[8].

The role of risk aversion in retirement provision

Security-focused savers often perceive the lack of guarantees in the Altersvorsorgedepot as a hurdle. It's important, however, to look at the risk in inflation-adjusted terms. A nominal contribution guarantee on private pension insurance does protect against losing your paid-in capital, but, because of the high product costs and low interest credited, it almost always leads to a real loss of purchasing power. The Altersvorsorgedepot, by contrast, taps into the long-term earning power of global equity markets, where historical crises have always been offset over periods of 15 years or more.

• Altersvorsorgedepot: optimal if you want to maximise state allowances, benefit from low costs, and capture the return potential of equity ETFs without expensive guarantee costs.
• Private pension insurance: suitable if you're aiming for a guaranteed lifelong income and are willing to accept substantial return trade-offs for that security.
• Switching from Riester: especially worthwhile for savers with unprofitable old contracts who want to transfer their savings into the more flexible, higher-return new subsidy system.

Our approach at Vorsorgedepot-Lotse is consistently hybrid and supports you neutrally in two ways. If you'd like to manage your retirement provision digitally, on your own, the knowledge section offers well-founded background and comparisons, while the subsidy calculator works out your exact state subsidy entitlement. If, on the other hand, you'd prefer personal guidance and structured advice, our independent advice service connects you with licensed experts who work out a tailor-made plan together with you.