Can the state scrap the AVD subsidy again?

Tilman Freyenhagen

Published on 30 July 2026 · Updated on 7 August 2026 · Managing Director & Partner, Alsterspree Verlag GmbH

Political change risk: how reliable are state subsidies?

An ordinary law can be changed by any future Bundestag, which rules out any legal entitlement to permanently unchanged subsidy rules. For you as a saver, however, this does not mean an arbitrary devaluation of your provision: state allowances already credited, and the gains achieved on them, fall under the far-reaching constitutional protection of property. A future change in the rules can adjust the framework for new contributions, but it does not touch the balance you have already built up in the Altersvorsorgedepot.

Legal basis: what guarantees this protection for existing entitlements

In practice, the rule-of-law principle of legitimate expectations protects existing savings. When the legislator modifies subsidy rates or incentives, established precedent shows that such changes affect only future contribution years. Historical adjustments to subsidised pension models show that acquired rights and credited amounts remain secured in what you already hold. For savers weighing up a switch away from Riester, the political change risk is therefore primarily a question about future savings dynamics, not a threat to state allowances you have already received.

• Protection for what you've already saved: allowances and investment gains already credited to your account remain unrestrictedly your property.
• Rule-of-law protection of legitimate expectations: changes in the law generally take effect only for the future and do not reach back retroactively into past contribution years.
• Flexibility to adapt: should the framework for future payments in change, you can flexibly adjust your savings rate or pause contributions at any time.

The political change risk should therefore be understood as a calculable framework. Anyone using state-subsidised models benefits from the legally anchored rules of the present, while constitutional protection of property secures what has already been earned.

Constitutional protection of legitimate expectations under Art. 20 Abs. 3 GG

In the public debate about the new Altersvorsorgedepot, a recurring worry is that a future federal government could simply scrap the state subsidy again. Constitutionally, the requirement of legitimate expectations anchored in the rule-of-law principle under Art. 20 Abs. 3 Grundgesetz (GG, Germany's Basic Law) protects citizens against arbitrary intervention by the legislator. However, the Grundgesetz does not guarantee that once-enacted subsidy laws will continue unchanged forever. In tax and social law, the Bundesverfassungsgericht (Federal Constitutional Court) draws a strict distinction between genuine and non-genuine retroactivity.

For savers, this rule-of-law distinction offers an important reassurance: all state allowances and tax refunds credited to your account for past contribution years enjoy constitutional protection for existing entitlements. Even in the hypothetical case that the AVD subsidy were discontinued in 15 years, the state would not be permitted to reclaim subsidy money already granted. As historical reforms affecting existing Riester contracts show, the legislator also regularly grants transition periods or preservation of accrued rights for old contracts when making future adjustments.

Political predictability versus parliamentary discontinuity

No Bundestag can stop future parliaments from amending laws for years to come. Anyone demanding an absolute eternity guarantee misunderstands how democratic legislation works. The constitutional system does, however, ensure that disappointing the trust you have placed in it is permissible only under very strict conditions. We regard this protection of legitimate expectations as a solid foundation that gives you reliable planning certainty for the own contributions you have already paid in (not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.).

A look back: what happened in earlier Riester and pension reforms?

A look at German legislation shows: the state can adjust the legal framework for future subsidies, but capital already granted and saved remains legally protected. When the Riester-Rente was introduced in 2002, and in later reforms, the principle of legitimate expectations and the guarantee of property always applied. While there is constitutionally no absolute eternity guarantee for future subsidy terms, state support already credited may not be withdrawn retroactively.

When the legislator decides on adjustments in the pensions field — such as the transition from Riester to the Altersvorsorgedepot (AVD) via the Altersvorsorgereformgesetz — existing rights are systematically safeguarded. Under established practice, savers can either continue existing contracts on the original terms, pause them, or transfer them with the subsidy preserved. A revision of the subsidy therefore never retroactively affects the assets you have already saved, only, at most, the subsidy structure for future payments in.

In practice, then, the political change risk is limited to modifications of the future saving phase. Anyone building up assets in the Altersvorsorgedepot secures, at each point in time, a legal entitlement to the state allowances and tax benefits granted up to that point. Future governments can adjust the framework for new contribution years, but assets already acquired remain protected by constitutional legitimate-expectations protection.

Protection for existing entitlements in the Altersvorsorgereformgesetz (AVRG)

With political reforms, many savers worry that benefits once promised could later be withdrawn. In the Altersvorsorgereformgesetz (AVRG, the Retirement Provision Reform Act), the legislator has anchored the legal framework for the transition from the Riester-Rente to the Altersvorsorgedepot from 2027. From a constitutional standpoint: the Grundgesetz protects trust in rights already acquired. State allowances already granted, as well as the capital saved, are subject to the protection of property under Artikel 14 GG. A retroactive cancellation of subsidy funds already credited is legally ruled out.

• Property protection on balances: all state allowances and tax benefits credited to the account up to a given date remain permanently in the saver's possession.
• Rules for existing Riester contracts: existing contracts can be continued unchanged or paused, without having to repay allowances already received.
• Future subsidy adjustments: a future Bundestag can change the rules for future contribution years, but cannot intervene retroactively in legal positions already acquired.

No parliament can give an eternally unchangeable guarantee for future subsidy rates. The legislator always retains the right to adapt subsidy models for coming years to new fiscal-policy conditions. Constitutional protection for existing entitlements, however, offers savers a high degree of reliability. Should the subsidy be modified in future, this always affects only subsequent contribution years.

For your personal planning, this means: the Altersvorsorgedepot rests on a clear legal separation between the past and the future. Whatever has once been booked to your account stays protected. We recommend viewing political reform debates objectively and basing your decisions on the legislation currently in force and on sound calculations.

Scenario analysis: what would happen if the subsidy were scrapped in future?

Should a future federal government cut the state subsidy for the Altersvorsorgedepot or decide to discontinue the subsidy system, the retirement assets you have built up by then would remain legally protected. On the basis of the constitutional prohibition on retroactivity and the general protection of property, allowances already paid out and the returns generated from them enjoy full protection for existing entitlements. Under German legal tradition, a political change in the law can take effect only for the future, so contributions paid in and subsidy money already credited remain your property.

1. 1. Cut-off date rule and protection for existing entitlements: all allowances and tax benefits credited before a change in the law takes effect remain permanently on your contract.
2. 2. Loss of future allowance entitlements: from the effective cut-off date, the state subsidy rate on newly incoming own contributions ceases; additional bonus payments are no longer granted.
3. 3. Preserved tax benefit during the accumulation phase: the assets already saved remain in the account and can continue to be invested and reallocated within the investment structure free of Abgeltungsteuer (withholding tax on capital gains).
4. 4. Flexible adjustment of your own contributions: you retain the freedom to pause the account, reduce your savings rate, or continue the portfolio as an unsubsidised savings plan.

Historical lessons from system changes and contractual reliability

Experience from earlier adjustments to the existing pool of Riester contracts demonstrates that the state reliably protects existing contracts through reforms. Even fundamental overhauls of the statutory framework have, as a rule, left the terms of existing contracts untouched. The political risk is thus primarily confined to the dynamics of future savings rates, not to the substance of the retirement capital you have already built up.

Note on legal classifications and example calculations: all model calculations and legal considerations serve exclusively for neutral orientation. They do not constitute legal or tax advice, nor investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

Flexibility as a shield: pausing contributions and switching provider

A central concern of sceptical investors relates to long-term commitment: what happens if future governments adjust the statutory framework or subsidy rates? The answer lies in the legal architecture of the Altersvorsorgedepot, which differs fundamentally from earlier, rigid pension contracts. The Altersvorsorgereformgesetz ensures that investors are in no way trapped in unfavourable contracts in the event of a political change of course. Statutory rights of choice protect your financial freedom of action and permanently safeguard the assets you have already built up.

Statutory protection instruments in the Altersvorsorgedepot

• Pause contributions at any time: should the state subsidy change, or your personal circumstances require adjustments, you can suspend or reduce ongoing payments without cancellation fees. If you change your contribution, allowances already granted and returns already achieved remain fully preserved in the account.
• Regulated provider switching: under the certification requirements, savers have the right to transfer their balance to another certified account provider. If your existing provider's terms deteriorate, you can move the entire capital while respecting the statutory cost caps.
• Protection for savings already accumulated: even with paused contributions, the tax deferral on investment gains continues until the payout phase. Similar to investors who put their Riester-Rente contract on hold, you retain all entitlements acquired so far in full.

This built-in flexibility acts as an effective shield against future legislative reforms. Should the state change subsidy parameters, you are not forced to keep paying rates that have become unprofitable. Instead, you pause the account, leave the existing capital in the higher-return capital market, or switch to a cheaper provider. We advise using these contractual options as an essential tool for protecting your own assets.

Special case: home ownership and payout — is there a risk of back-tax claims?

In the tax design of retirement provision, withdrawal rules and deferred taxation are often a source of uncertainty. The Altersvorsorgedepot (AVD) applies the principle of deferred taxation^[1]: during the accumulation phase, returns and gains stay tax-free, while payouts in retirement are taxed as other income at your individual tax rate. As a rule, this does not involve a blanket revocation of allowances already granted, as long as the capital remains within the deferred-taxation system or is used within the scope of the statutory provisions.

Withdrawal for owner-occupied property and early cancellation

Special rules apply to withdrawals for a home and to early payouts. While under the previous Wohn-Riester scheme, a capital withdrawal for owner-occupied property is recorded via a Wohnförderkonto (housing subsidy account) and taxed on a deferred basis in retirement, the statutory system for the Altersvorsorgedepot sets clear limits.

• Subsidy-neutral use: withdrawals for an owner-occupied home remain subsidy-neutral under the statutory rules, so state allowances already credited are not reclaimed.
• Harmful use: if a regular capital withdrawal takes place before the statutory age threshold is reached (for legacy Riester contracts generally before completing your 62nd year, for the Altersvorsorgedepot before completing your 65th year) without a subsidy-eligible purpose, this counts as harmful use.
• Consequences of cancellation: in the event of harmful use, all state allowances and the tax benefits obtained must be repaid, while the remaining returns are subject to Abgeltungsteuer (withholding tax on capital gains).

For savers, this means transparency and planning certainty: anyone who holds the Altersvorsorgedepot until the regular payout phase or uses it for subsidy-eligible property faces no risk of a retroactive back-tax claim. A back-tax claim therefore only threatens in the case of a deliberate dissolution against the statutory rules.

A perspective for sceptics: how to price the political risk into your provision

A parliamentary subsidy guarantee cannot, constitutionally, be fixed unalterably for decades, since future legislators retain the right to amend the law. However, on the grounds of constitutional protection of legitimate expectations, state allowances and tax benefits already credited enjoy unrestricted protection for existing entitlements and remain permanently secured in the Altersvorsorgedepot. Should politics change conditions in future decades, historical practice shows this always affects only subsequent contribution years — never the balance you have already earned.

Strategic diversification: combining subsidised and unsubsidised building blocks

• State-subsidised Altersvorsorgedepot: we recommend this building block for making targeted use of allowances and tax benefits on your base savings contribution, to increase your effective return on capital through the state subsidy.
• Unsubsidised ETF savings plan: offers you flexibility throughout the year, unrestricted availability, and complete independence from future regulatory conditions.
• Balanced overall portfolio: combining both approaches minimises the political change risk while making optimal use of state incentives at the same time.

We therefore classify the political risk as a calculable factor that justifies a precautionary split, but by no means argues against subsidised savings. Anyone using state allowances as a return booster while also building unsubsidised accounts in parallel is hedged against every reform scenario. Whether staying put or switching makes sense for you is something our neutral Riester comparison can assess, or, if you prefer, our independent advice service. (Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.)