According to calculations by the comparison portal Verivox, savings in a newly state-subsidized retirement savings account could be less beneficial than using a completely free savings account without any public contributions, if the annual cost limit is fully utilized.
For instance, a 25-year-old investor saving €150 monthly into an ETF savings plan, assuming an average return of 7.5 percent, could accumulate approximately €496,000 by age 67, provided the investment uses a brokerage account with no annual fees and no costs for the monthly contributions. If the savings were made in the new subsidized retirement account, the monthly contributions could be up to €45 higher due to state subsidies, resulting in a projected balance of around €645,000 at retirement, meaning the investor would receive €149,000 more than without subsidies.
A comparison shows that an individual aged 45 could save about €98,000 until retirement without subsidies. With the state subsidies, however, a projected nest egg of €127,000 could be built by retirement age at 67.
However, Verivox notes that since the law imposes an annual cost cap of one percent, this could significantly diminish asset growth. Under this one percent cost rate, the 45-year-old would save around €111,000 by retirement. While this is calculated to be over €13,000 more than saving without subsidies using a free account, the total fees incurred over the 22 years until retirement in this scenario would amount to roughly €16,000.
The impact of costs is particularly pronounced over long periods. A 25-year-old would accumulate about €480,000 over the remaining 42 years until retirement with one percent in annual fees-which is approximately €16,000 less than saving without subsidies using a free account.
Oliver Maier of Verivox advises consumers to monitor investment costs very carefully when choosing a retirement savings account, emphasizing the importance of selecting a product that does not fully utilize the legal cost cap. He points out that although a one percent fee might seem manageable, over years and decades, such a rate removes so much capital that it could potentially exhaust the entire state subsidy.
For this analysis, Verivox assumed a constant annual return of 7.5 percent, modeled after the historical performance of the MSCI World minus typical ETF fees. Taxes were not factored into the calculations.