What is Wohn-Riester?
Wohn-Riester is a special form of the German Riester pension scheme that allows you to use your contributions and state subsidies from Riester to finance the purchase of your own home or to repay an existing mortgage loan.
The main idea is to encourage people to secure owner-occupied housing before or during retirement, so that their living expenses are lower in old age.
Advantages of Wohn-Riester
Direct government subsidies:
Eligible participants receive annual state allowances (Zulagen):
up to €175 basic allowance per person,
plus child allowance of €185 or €300 per child, depending on the year of birth.
Tax deductions:
Annual contributions (including allowances) of up to €2,100 can be claimed as tax-deductible special expenses, reducing your taxable income.
Security in retirement:
Owning a fully paid-off home in retirement significantly reduces monthly expenses and increases financial stability.
Flexible use of funds:
Wohn-Riester can be used to:
buy an owner-occupied apartment or house,
build a new home,
repay existing mortgage loans on residential property,
finance certain extension or modernisation measures for your own property.
What can be financed with Wohn-Riester?
You can use Wohn-Riester funding for:
Purchasing an apartment or house for your own residential use,
Constructing a new owner-occupied home,
Repaying existing mortgage loans secured on your main residence,
Financing renovations, extensions or modernisation of your own home, provided the legal requirements are met and the measure improves long-term housing conditions.
Eligibility criteria for Wohn-Riester
Self-occupied property:
The property must be used as your main residence; generally, it may not be rented out.
Residence in Germany (or EU/EEC under conditions):
As a rule, the property must be located in Germany; in some cases, homes within the EU/EEC may also be eligible, subject to specific rules.
Minimum contribution requirement:
To receive the full state subsidies, you must pay a certain minimum contribution each year (usually 4 % of your previous year’s gross income subject to social insurance, up to €2,100 including allowances).
Long-term self-use until retirement:
The property should be used long-term for your own housing needs. Selling or renting the property before retirement can lead to repayment of subsidies or a transfer of the capital into another Riester product.
How does taxation work with Wohn-Riester?
Wohn-Riester follows the principle of deferred taxation:
During the saving or repayment phase, you benefit from:
state allowances (Zulagen),
tax relief through the deduction of contributions as special expenses.
At retirement age, taxation takes place via the so-called Wohnförderkonto (housing subsidy account):
All subsidised amounts (allowances and tax-privileged contributions) are recorded on this fictitious account and accrue notional interest.
The final balance of this Wohnförderkonto is then used as a basis for income tax in retirement.
You can choose between two taxation options:
One-off taxation with a discount:
You can pay tax on the full amount in one lump sum and receive a 30 % discount on the taxable base.
Annual taxation in instalments:
Alternatively, you can spread tax payments over annual instalments, typically until around the age of 85.
Example
If you contribute €2,100 per year to a Wohn-Riester contract and receive:
a €175 basic allowance, and
a €300 child allowance for one child,
your total subsidised amount per year will be €2,575.
This amount (your own contributions plus state allowances) can be used to repay a mortgage loan. This leads to:
a faster reduction of the outstanding loan,
lower interest costs over the entire term,
and a quicker path to full home ownership.
Risks and points to watch out for
Tax obligations in retirement:
Because taxation is deferred via the Wohnförderkonto, you will face tax payments on the subsidised amounts in retirement. This must be taken into account when planning your retirement income.
Strict usage conditions:
The property must remain self-occupied. If you sell, rent out, or move out (for example, abroad), this may trigger repayment of subsidies or require a transfer to another Riester product.
Administrative complexity:
Managing the Wohnförderkonto, complying with Riester rules and handling the tax implications can be complex and often requires professional advice.
Tips before using Wohn-Riester
Seek financial or tax advice:
Talk to an independent financial adviser or tax consultant before signing a Wohn-Riester contract.
Plan your retirement phase carefully:
Decide in advance whether you prefer one-off taxation with discount or annual taxation and how this will affect your disposable income in retirement.
Check your long-term housing plans:
Make sure you intend to live in the property for the long term, to avoid repayment obligations or complicated transfers.
Consider combinations with other support schemes:
Check whether Wohn-Riester can be combined with KfW loans or other subsidy programmes to improve your overall financing structure.
Conclusion
Wohn-Riester is a smart financial tool that combines state-subsidised retirement savings with building up owner-occupied property. Thanks to government allowances and tax benefits, it can help you achieve the goal of owning your own home while also improving your financial security in retirement.
However, it also requires careful planning, a long-term commitment to living in the property and a clear understanding of the tax rules. With the right strategy and good advice, you can make the most of Wohn-Riester and avoid unpleasant surprises later in life.
The editorial team of this website aims to provide accurate information based on thorough research and multiple sources. Nevertheless, errors may occur or some details may not be fully confirmed. Please therefore treat the information presented here as an initial reference and always contact the relevant authorities or qualified experts for binding and up-to-date information.
