Deferred taxation: do I lose out in the end?

Tilman Freyenhagen

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

What does deferred taxation mean for the Altersvorsorgedepot?

Deferred taxation on the Altersvorsorgedepot means that you pay your contributions during the accumulation phase out of gross income with tax relief, and only pay tax on withdrawals in retirement^[1]. Under this state-subsidised model, you by no means pay extra in the end - you simply shift the tax burden into the retirement phase. Because your personal tax rate is usually significantly lower in old age than during your working life, this generally results in a noticeable financial advantage for you overall.

A key lever of this rule is the so-called tax deferral effect. While your capital grows in the account over decades, no annual tax is charged on dividends, interest or capital gains. This untaxed money keeps working at full strength and considerably reinforces the compounding effect. Only once the payout phase begins does income tax apply to the amounts withdrawn. This time shift leaves you with more liquidity for wealth building during the accumulation phase, as we show in detail in the articles in our knowledge section. Since no capital gains tax reduces the growth, the account balance grows noticeably faster than with a classic, unsubsidised securities account.

The worry that you will end up paying more tax is therefore unfounded. The tax burden is not added on top - it is simply shifted. Because retirees typically have lower income than active earners, the tax rate at withdrawal is almost always below the rate during the active working phase. To find out whether switching from an existing Riester pension makes sense for you individually, you can use our source-based subsidy calculator. Please note: all calculations and tax comparisons are for illustration only and do not constitute financial or tax advice (not investment advice within the meaning of § 1(1a) no. 1a KWG).

The accumulation phase: benefiting from 0 percent tax on account gains

The new Altersvorsorgedepot, which replaces the Riester standard from January 2027, is defined by a consistent tax advantage during the savings phase. Unlike a classic direct investment, no tax at all is charged on your returns throughout the entire wealth-building period. This means distributions and realised capital gains remain 100 percent in the account and can be reinvested immediately, with no deduction by the tax office. You therefore benefit from a full tax deferral. You will find detailed articles and practical guides on this in our knowledge section.

This tax-free wealth building is highly attractive for all groups of savers. It suits young families and employees just as much as the self-employed, who find in the Altersvorsorgedepot a highly flexible, tax-subsidised retirement solution. Because no tax reduces the annual return, your retirement assets grow noticeably faster than in an unsubsidised account.

The complete waiver of capital gains tax and advance lump-sum tax during the accumulation phase produces a massive compounding effect that becomes noticeably significant over decades^[2]. With a regular ETF savings plan, part of the annual growth in value is taxed away each year through the advance lump-sum tax, which shrinks the capital available for future interest. In the Altersvorsorgedepot, your capital keeps working undiminished. Reallocating funds or ETFs within the account also remains tax-free. Tax only becomes due on withdrawal at retirement age, but then at your personal income tax rate, which in retirement is usually significantly below the rate during your working life. You can easily simulate how this advantage specifically affects your individual final capital with the subsidy calculator. Please note: not investment advice within the meaning of § 1(1a) no. 1a KWG.

The payout phase: how taxation works in old age

Deferred taxation on the new Altersvorsorgedepot (AVD) means that you pay your contributions during the accumulation phase with tax relief, and only pay tax on withdrawals in retirement^[1]. So you do not pay extra in the end - you simply shift the tax burden to a life phase in which your personal tax rate is usually significantly lower than during your active working life. Because, in addition, all profits and interest are reinvested completely tax-free during the accumulation phase, you benefit from an enormous tax deferral effect that accelerates the growth of your capital.

The cash-inflow principle: taxation only on payout

Only once you receive regular payouts from your account in retirement does the tax office step in. Under the so-called cash-inflow principle, every euro paid out is recorded as taxable income and taxed at your then-applicable personal income tax rate^[1]. This structure is advantageous for most savers, as the tax saving during the working phase massively strengthens the compounding effect. In our knowledge section you will find in-depth analyses of how these statutory rules affect different life models.

Whether this tax deferral is worthwhile for you individually can be calculated precisely. With the subsidy calculator you can compare the tax effects and the projected final capital clearly. Please note that all tax calculations and projections are purely illustrative and do not constitute tax or financial advice within the meaning of the law (not investment advice within the meaning of § 1(1a) no. 1a KWG). For tailored planning and more in-depth questions, an independent advice service is always recommended.

Tax deferral: why your tax rate is usually lower in retirement

The real advantage of deferred taxation is rooted in German tax law and its built-in progressive tax scale. Because your total income in retirement is usually lower than during your active working life, your personal tax rate also drops significantly. You therefore deliberately shift the tax burden from a life phase with a high tax load to a phase with a significantly lower burden. While today you pay in contributions tax-free and thereby lower your taxable income, in old age you pay tax on the withdrawals at a far more favourable rate. This advantage is also confirmed by the Deutsche Rentenversicherung, since the tax relief during the working phase usually exceeds the later tax burden in retirement^[3].

The principle is: save tax at a high tax rate, pay tax at a low tax rate. To find out how this effect specifically affects your planned retirement provision, it helps to look at the exact figures. With the subsidy calculator you can calculate the tax advantages and your expected subsidy individually. For more in-depth questions on the Riester reform and the statutory tax rules, our knowledge section is available to you free of charge. The platform Vorsorgedepot-Lotse offers you transparent, source-based orientation for your financial future. Please note: all example calculations and comparisons are for general guidance. Not investment advice within the meaning of § 1(1a) no. 1a KWG.

Special expense deduction: how the state reduces your tax burden today

To make contributions to the new Altersvorsorgedepot financially attractive already during the accumulation phase, a well-established tax mechanism applies: the special expense deduction. The subsidised own contribution you pay into your account over the course of a calendar year can be claimed as a tax-reducing item in your annual income tax return. This immediately and noticeably lowers your taxable income here and now. Under the enacted Altersvorsorgereformgesetz (pension reform act), the subsidised own contribution from 2027 is up to 1,800 euros per calendar year, embedded within a maximum possible contribution of 6,840 euros.^[1] Through the tax office's more-favourable-treatment check, the deductible amount increases by the allowances due to you. This means a noticeable expansion of the tax-favoured savings volume compared with the previous statutory rule.

The tax framework in direct comparison

Through this significant increase in the framework, employees with a higher tax burden in particular can achieve substantial net relief. Via the income tax assessment, the state refunds part of your paid-in contributions, which reduces your actual own outlay for wealth building. To calculate how strongly this tax shift affects your individual situation, you can use the subsidy calculator. Supplementary, source-based analyses and detailed guides on all tax aspects of the reform can also be found on the knowledge section.

Note: the figures and tax framework listed are based on the enacted and promulgated Altersvorsorgereformgesetz (the reform of private retirement provision from 2027).^[6] This is an illustrative presentation that does not constitute tax or financial advice within the meaning of section 1(1a) no. 1a KWG.

Subsidised versus unsubsidised: two sets of tax rules in the same account

The new Altersvorsorgedepot offers you a high degree of flexibility, as you can pay in more than just subsidised contributions. In principle, the law draws a strict distinction within the same account between subsidised core contributions and unsubsidised additional payments. While subsidised contributions benefit from state allowances or the special expense deduction, unsubsidised additional payments flow into the account from your already-taxed net income. The decisive advantage: during the decades-long accumulation phase, both types of contribution grow completely tax-free, allowing the compounding effect to work optimally^[1].

The payout phase reveals the well-thought-out tax interplay within the Altersvorsorgedepot. For subsidised contributions, classic deferred taxation applies: payouts are taxed in retirement at your then-applicable personal income tax rate, which is usually significantly lower in old age than during your working life. For unsubsidised contributions, by contrast, you have already paid tax on the invested capital during the accumulation phase. The paid-out capital therefore remains tax-free in old age - only the returns generated are subject to favourable taxation^[4]. This tax split lets you adapt your private retirement provision flexibly to your individual tax situation.

If you want to plan in more detail how these rules affect your personal pension, our subsidy calculator is available to you. As a neutral knowledge section, we place great value on transparent calculations based on the current guidelines of the Federal Ministry of Finance. Not investment advice within the meaning of § 1(1a) no. 1a KWG.

Before-and-after comparison: worked example of the tax shift

To illustrate the mathematical effect of deferred taxation, a direct comparison between a conventional, unsubsidised ETF savings plan and the state-subsidised Altersvorsorgedepot (AVD) helps. With the classic account, annual returns are subject to capital gains tax and, where applicable, the advance lump-sum tax. With the Altersvorsorgedepot, by contrast, this tax burden is completely eliminated during the accumulation phase. The capital can grow gross for decades, which drastically strengthens the compounding effect. Only on payout in retirement does deferred taxation apply, taxing the withdrawn assets at the then usually significantly lower personal tax rate^[1].

A simplified worked example illustrates this effect: if 200 euros a month is invested over 30 years at an average return of 6 percent, the annual tax burden in the standard account means noticeably less capital is available at the end. In the Altersvorsorgedepot, by contrast, the balance grows undiminished. Even if the total capital in retirement is fully taxed on payout at an assumed personal tax rate of 20 or 25 percent, the remaining net assets generally clearly exceed those of the unsubsidised savings plan. This is due to the enormous leverage of the tax deferral effect, which works like an interest-free loan from the state^[5]. To calculate your individual advantages precisely and work out your expected tax saving, you can use our interactive subsidy calculator. (Note: this worked example is for illustration only. Not investment advice within the meaning of § 1(1a) no. 1a KWG.)

Because the tax picture depends on your personal income situation both during your working life and later in retirement, a detailed individual assessment is generally recommended. Our knowledge section offers you in-depth guides on all tax aspects of the Altersvorsorgedepot. For personal planning tailored to your life situation, we are also happy to arrange an independent advice service, where licensed experts analyse your tax situation and check whether switching from existing contracts would be financially advantageous for you.

The path to the Altersvorsorgedepot from 2027: what you need to do now

The new Altersvorsorgedepot officially starts in 2027, ushering in a comprehensive reform of private retirement provision in Germany^[1]. To benefit fully from the fundamentally improved return prospects of equity-based investing and the state subsidy, you should prepare early. Since the principle of deferred taxation is a central building block of the new model, it is worth setting the right personal course today. Many savers wonder whether switching existing contracts is worthwhile and how best to manage the transition, both financially and for tax purposes. With a structured approach, this preparation is entirely risk-free.

• Analyse existing contracts closely: determine the current guaranteed values, ongoing effective costs, and the state allowances already received on your Riester pension.
• Calculate your individual switch: use the interactive subsidy calculator to simulate transparently the exact state subsidy, the expected final capital, and the financial advantage of switching.
• Build solid expertise: inform yourself in the knowledge section about the statutory framework, tax deferral effects, and the exact process of the 2027 pension reform.

The decision on the right path into the Altersvorsorgedepot should rest on reliable data, since the tax advantages apply only to certified account contracts^[1]. While decisive self-directed savers prefer a direct comparison, many investors want personal guidance. For this route, our independent advice service is available to you. Through the platform Vorsorgedepot-Lotse, we connect you free of charge with licensed, independent financial advisers who analyse your personal tax situation.

Important note: the calculations produced by our tools are for general information and guidance. They do not constitute investment advice within the meaning of § 1(1a) no. 1a KWG.