Germany's pension reform is coming. Are you ready to lead it?

The next era of long-term investing starts now

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Germany is entering a new era of long-term wealth creation. The planned pension reform will be the biggest shift in retirement savings policy in decades, introducing capital-market investing as a structural pillar of the pension system. With the reform gaining momentum, the government is preparing to reshape how millions of people save for retirement.

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For banks, brokers, and fintechs, this is more than policy. It is a once-in-a-generation opportunity to be the first movers. Those who act now will define the next 30 years of retirement investing.

Why now: Germany’s pension model is under pressure

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Germany’s existing pension system relies heavily on workers’ contributions funding current retirees. With an aging population and a shrinking contributor base, the statutory pension can no longer keep pace with demographic realities. The public pension covers only 48% of pre-retirement income, 14% below the EU average¹.

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At the same time, private pension coverage has stagnated. More than 20 years after its introduction, the Riester-Rente accounts for around 16 million contracts², with many being dormant or inactive. The model has failed to deliver the participation or returns needed to offset demographic pressures.

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Despite this, investor behaviour is changing. Over 11 million new securities accounts have been opened since 2019, a 47% surge³, reflecting a shift toward capital market participation and long-term wealth creation. Policymakers are taking note and seeking to align pension structures with these evolving investment patterns. Yet, compared to peers, Germany still lags behind. Sweden’s IPS, the UK’s SIPP, Switzerland’s Pillar 3a, and the U.S. 401(k) have long shown how effectively capital markets can support retirement provision.

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The message is clear: Germany’s retirement system must be investment-led.

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What’s changing: from pay-as-you-go to capital markets

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The coalition agreement between CDU and SPD (May 2025) lays the foundation for a modern, capital-market-based pension system built on two new pillars.

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1. Altersvorsorgedepot: the revamped Riester

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The Altersvorsorgedepot is designed as a tax-incentivised, capital-market-based retirement account for adults. Inspired by models such as the UK’s SIPP and the U.S. 401(k), it aims to replace rigid guarantees with flexible, higher-yield investment options.

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• No rigid capital guarantees, allowing higher growth potential
• Government subsidies (up to a certain threshold per year)
• Broad investment universe including ETFs, mutual funds, bonds amongst others
• Simple, digital, and transparent

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Key design principles include digital onboarding, open investment choice across ETFs, mutual funds, bonds amongst others, and government contributions that reward consistent saving. While legislative details are still being finalised, the direction is clear: the next generation of pension products will be built on capital market participation, not insurance-style guarantees.

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2. Frühstart-Rente: investing from the first euro

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Every child will receive a state-funded investment account, with €10 per month contributed from ages 6 to 18. It will be managed digitally and is tax-deferred until retirement.

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The program signals an institutional commitment to integrating capital markets into the fabric of social policy. 

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The market is already reacting. Neobrokers and fintechs have introduced child account offerings that mirror the proposed structure, capturing the first wave of demand and signalling a shift in market expectations. Trade Republic and Scalable Capital have already rolled out their offerings, and Finanzen.net zero recently introduced a monthly bonus equivalent to the future Frühstart-Rente of €10 until the end of year. Many providers are running limited-time promotions, underscoring how quickly market participants are positioning ahead of the reform.

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Takeaway: for financial institutions, these changes require not just product innovation but a rethinking of infrastructure. The ability to administer millions of subsidised, long-term accounts requires scalable, automated, and cost-efficient investment infrastructure.

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The operational challenge

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Translating policy ambition into functioning products is a complex technical challenge. Pension accounts must combine digital onboarding, custody, trading, contribution and subsidy management, and tax handling into a seamless process that operates efficiently at scale.

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Legacy systems, often fragmented and built around batch processing, are not suited to this task. Manual processes, static data models, and limited integration capabilities constrain the ability to launch compliant, user-friendly products quickly. As new pension products become more digital, modular, and transparent, these limitations will become increasingly visible.

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Modern pension products require infrastructure that is API-first, real-time, and designed for regulatory adaptability. This includes the ability to open accounts instantly, manage fractional investments, calculate and apply taxes automatically, and maintain transparent reporting across millions of end users.

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The strategic opportunity

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The introduction of Altersvorsorgedepot and the Frühstart-Rente together create a structural inflection point for the German savings market. The opportunity extends beyond pensions: it is about establishing the capabilities for the next era of long-term investing.

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Following the coalition committee meeting of 9 October 2025, the government reaffirmed its commitment to both reforms, setting an accelerated legislative timeline. Cabinet approval for the key framework is expected before the end of 2025, with implementation from early 2026. This confirmation removes uncertainty around timing and provides financial institutions with a clear signal to begin preparing now.

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Industry momentum is building in parallel. More than 30 digital financial companies, including leading banks, brokers, asset managers, and Upvest, jointly co-authored a position paper calling for a capital-market-based pension solution. This collective initiative demonstrates broad market alignment around the need for reform and strengthens the case for modern, investment-driven retirement products that meet the expectations of today’s generation of savers.

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Financial institutions that act early will secure a first-mover advantage in user acquisition, product readiness, and regulatory positioning. They will also build internal expertise that can be extended to other long-term savings products as the market evolves.

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The reform rewards those who combine strategic foresight with operational readiness. Adopting modern, cost-efficient, and scalable investment infrastructure today will allow financial institutions to participate fully in the next phase of Germany’s financial transformation.

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Preparing for the transition

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Financial institutions should begin by assessing their current infrastructure against four criteria: scalability, compliance flexibility, digital readiness, and time to market.

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• Can existing systems support millions of long-term accounts efficiently?
• Are regulatory and tax processes sufficiently automated to adapt to new frameworks?
• Do current architectures enable real-time data flows and modern user experiences?
• Can new products be launched quickly enough to capture early market demand?

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Where gaps exist, financial institutions need to act now. They may choose to build internally, integrate vendor systems, or partner with infrastructure providers such as Upvest to accelerate time to market. The optimal approach depends on internal capabilities and long-term strategic objectives. Early readiness will be key: the ability to launch modern pension products as soon as the reform takes effect will determine who captures the first wave of demand.

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How Upvest helps you lead the reform

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Modern pension products require scalable, digital-first investment infrastructure. Financial institutions that prepare now will not only be ready to serve the first wave of participants in the new system but will also shape the broader market for decades to come.

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Jonathan Brander, COO at Upvest, comments: “The next 12 months will define the next 30 years of retirement investing. Upvest enables financial institutions to lead this change, not follow it.”

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Upvest provides the regulatory-ready investment infrastructure that allows financial institutions to build modern pension products in months, not years.

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With Upvest, financial institutions can bring modern pension investment products to market quickly and efficiently:

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• Speed to market: pension products available from day 1 as soon as the reform comes into effect.
• Scalable architecture: manage high volumes of accounts and transactions through API-based, cloud-native systems.
• Operational simplicity: streamline custody, brokerage, tax reporting, and contribution management within a single platform.
• Proven expertise: built on experience powering long-term investment products such as ISAs in the UK and PEAs in France, demonstrating readiness for similar regulated savings markets.

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The reform will reshape how Germany builds wealth. Financial institutions that act now will define the future of retirement investing.

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Get in touch with our experts to explore how Upvest can power your pension-ready investment offering.

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Disclaimer: This article was written in October 2025. It is intended for educational and informational purposes only and should not be construed as financial or investment advice. Always conduct thorough research and seek professional guidance before making any investment decisions. The past performance of any investment does not guarantee future results.

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Sources:

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1. OECD: OECD Pensions at a Glance (2023)
2. BMAS: Statistik zur privaten Altersvorsorge (Riester-Rente) (2025) 
3. Finanz-Szene: Die lawinenartigen Umwälzungen im deutschen Retail-Brokerage report based on Bundesbank Depotstatistik data (2025)