Following the Berlin earthquake, it appears that shares and Exchange-Traded Funds (ETFs) may not be exempt from taxation.

Following the Berlin earthquake, it appears that shares and Exchange-Traded Funds (ETFs) may not be exempt from taxation.

In the midst of recent political developments, including the breakdown of Germany's coalition government, the status of retirement savings in the country remains relatively stable. Key updates affecting retirement savings and pensions include adjustments in contribution rates and benefits for 2025.

Every employee contributes 18.6% of their gross salary to the state pension system, with half being borne by the employer and employee respectively. As of July 1, 2025, pension payments have increased by 3.74% due to inflation, resulting in approximately €66.51 more per month for average retirees. Additionally, there has been an increase in the long-term care insurance contribution rate to 3.6%, applicable to pensioners from July 2025, and a one-off contribution of 4.8% in the same month.

Private pension plans are generally considered less attractive in Germany due to high costs, low returns, and associated risks. Industry experts suggest investing in ETFs rather than private pension policies. Besides the mandatory statutory pension, there are other pension types such as Riester, Rürup, and company pension plans, but private pensions are less favoured for new savings.

Despite the coalition government breakdown, there is no indication that pension or retirement savings policies have been substantially altered as a direct consequence. The latest regulatory changes and contribution rates are being implemented as planned for 2025.

The retirement savings account, also known as the Lindner pension, was an unfinished project of the traffic light coalition in Germany. Intended to provide a state subsidy for investors, the retirement savings account would have allowed them to invest tax-free in stocks and ETFs. However, with the breakdown of the coalition, it is now unlikely that the corresponding law for the retirement savings account will be passed.

This development may be a setback for the emerging German shareholder culture, which has grown in part due to mistrust in the state pension. For investors, the only option for now is to continue building wealth with a "normal" account and without state subsidy. The year-end rally is a potential topic for investors to consider, separate from the political situation affecting the retirement savings account.

The stock market, however, appears to be hardly reacting to the news of the coalition breakdown in Berlin. The retirement savings account was a source of hope for the German investment scene, and its unlikely passage may mark a temporary setback in the country's burgeoning investment culture.

1. Given the recent political changes, such as the breakdown of Germany's coalition government, and the stability of retirement savings, some industry experts suggest investing in ETFs rather than private pension policies, as they offer potentially better returns with lower costs and risks, when compared to private pension plans.
2. Despite the breakdown of the coalition government in Germany, no significant alterations to the pension or retirement savings policies have been announced, with the latest regulatory changes and contribution rates being implemented as planned for 2025, including the increase in pension payments due to inflation and the increase in the long-term care insurance contribution rate.

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